I scour the message boards and sites to find out what are the “Hot Stocks”.  Some are not worth talking about, but others have made for interesting blogs and articles (HEB, KERX, SPNG and others).  Today, my blog is about Juniper Group, Inc. (JNIP)

Today already (about 12 EST), JNIP had traded over 500 MILLION  shares. That is a lot of shares in anyone’s book.  The shares are up 33% for the day.  BUT, Let’s put that in perspective.  The opening for one share of JNIP was .0003.  In other words, 3/10 of a penny.  The stock has zoomed to 4/10 of a penny in heavy trading.

Is JNIP going to be a sub-penny for the rest of its life or is there a real company there?  Is their story going to turn out more like SPNG or one of the other countless stocks that are in the penny stock graveyard?  I can honestly say, “I am thinking graveyard”.

Juniper Group, Inc. does business through two subsidiaries:

1. Broadband Installation and Wireless Infrastructure Services

and, surprisingly

2. Film Distribution Services (more on that one later)

They are doing a great job of press releasing about all the deals they have inked.  One of their latest press releases is about signing a deal with a “wireless industry giant”.  What this (and other releases) are not telling traders is the financial ramifications of these projects.  Specifically, what dollar amount are we talking about?  Taken at face value, these press releases seem to indicate that the company is moving forward and going to be generating income and be profitable.  It all sounds good until you put things in perspective.

Here is some perspective for you!

The company has serious going concern issues.  The 10-K audit opinion carried a going concern exception.  It appears that the company has little or no capital to grow.  JNIP did just get approx. $800K in financing, but at 13.2% interest and highly dilutive if converted into stock.  They will most likely face both shareholder and SEC suits  over the private sale of stock without the proper exemptions from registration.  That has left them open to suits from investors, past and present and actions from the  SEC.   They are “in a heap of trouble” as my father would say.

Perhaps the most damaging revelation about JNIP revolves around their issuance of callable preferred convertible notes.  In the 10-K (available for free off of their site), you should read pages 8 and 9 and you will be horrified.  I won’t abstract all of the information here, except to quote one line:

“Our obligation to issue shares upon converion of our callable secured convertible notes is essentially limitless”

JNIP isn’t kidding either.  At current prices, if those notes were converted current shareholders could own less than 1% of the company!

I also call into question whether this company can generate the kind of sales, both in absolute dollars and growth rate, that will make this stock attractive for anything other than a penny stock play.  I have serious doubts that a service agreement business model will afford this company the kind of meteoric growth it needs to keep investors interested and creditors at bay.

One last note:  Be worried when your wireless infrastructure play is also a movie producer

One last, last note:  I would stay so far away from the deal, I would need the Hubble Telescope to see it….or short the heck out of it, if you can find shares.