TheStreetSweeper releases an update on Clean Diesel Technologies (CDTI). This Oxnard, California automotive emissions control company’s stock has apparently reacted to a strange pump piece published yesterday.
The piece is particularly concerning because the promoter first says it received no compensation and at another point states that its pieces are bought-and-paid for. The Securities and Exchange Commission just recently charged 27 firms and individuals in connection with alleged fraudulent promotion of stocks.
Below is the tweet from the paid advertiser, directing people to the advertiser’s site:
The link to the promotional piece is here.
The promoter’s report ignores substantial risks affecting CDTI, including:
1. CDTI is a cash-burn machine, running on empty. The burn rate is about $3.5 million per quarter. Cash sat at about $7.8 million at the end of the year. So at this point, it would have barely enough cash to operate another quarter.
2. A cash raise – perhaps stock selling or a debt tap – appears imminent. More raises are likely ahead, too, with the potential to water down existing stock.
2.Losses hit $23.5 million last year, accelerating total losses to nearly a quarter-billion bucks. Going concern issues threaten the business.
3.The stock has risen recently – not on the merits of the company – but on paid advertisements.
4. Catalyst revenue – the chief source of revenue – has dropped as the chief customer backs away. CDTI reports that entire revenue will end next year.
5. Revenue faces additional risk as President Trump has clearly signaled he wants cuts to emissions control regulations, thus reduced need for CDTI products.
So we explain the downside risks associated with this stock. But the pump piece author talks unconvincingly about financial figures that seemed fine and finally concludes that they don’t really know what’s going on with the stock … and ends with this telling bit of information:
“In any case, we encourage you to subscribe to our news alerts, as we believe that we may be able to explain the share price move soon. We will be updating our subscribers as soon as we know more. For the latest updates on CDTI, sign up below!”
It looks as though Insider Financial simply wants the reader to become a subscriber.
It’s a huge issue that Insider Financial states it has received no compensation for the piece. But the site disclaimer indicates otherwise:
“Disclaimer – This newsletter is a paid advertisement, not a recommendation nor an offer to buy or sell securities. This newsletter is owned, operated and edited by Archangel Media Consulting, LLC. Any wording found in this e-mail or disclaimer referencing to “I” or “we” or “our” or “Archangel Media” refers to Archangel Media Consulting, LLC. Our business model is to be financially compensated to market and promote small public companies.”
All promoters and companies need to be aware that the Securities and Exchange Commission has begun cracking down on paid promotions. The commission issued a warning earlier in April:
27 Firms and Individuals Charged With Fraudulent Promotion of Stocks
FOR IMMEDIATE RELEASE
Washington D.C., April 10, 2017—
The Securities and Exchange Commission today announced enforcement actions against 27 individuals and entities behind various alleged stock promotion schemes that left investors with the impression they were reading independent, unbiased analyses on investing websites while writers were being secretly compensated for touting company stocks.
(Source: SEC press release)
Once again, CDTI stock appears to have reacted to a promotional piece because there is no news. We are concerned about this company and anyone who buys into it, particularly at this level.
We find it particularly strange and concerning that the promoter says at one point that the piece is not paid … and at another point that it is bought-and-paid for. We may alert the SEC about this discrepancy, as we continue digging into CDTI.
TheStreetSweeper expects the stock price will decline swiftly and later fall to about $1 and change.
* Important Disclosure: The owners of TheStreetSweeper hold a short position in CDTI and stand to profit on any future declines in the stock price.
* Editor’s Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to email@example.com.