SPNG and JAZZ

SPNG - I wrote an article on SPNG when it was at 2.1 cents.  You can read it here.  I thought they were going up, but didn’t have any idea that it could be so “up”.  I had 100K shares and made a very tidy profit….I wished that I had stayed in.  But, I took my profit and I am thankful for that.

The question is , “Do I get back in”.  I am watching SPNG run again today.  I tried to buy at .181, but didn’t get filled.  It has already run to .19.  Here is what we know:

- SPNG has made a feast of good news for its investors.  They appear to really have made a huge advance in exposure leading to sales.  The latest jump can be tied to their annnouncement that they are being sold in Costco.  What will be telling with that relationship will be if they re-order.  I have had dealings with Costco and they will make or break companies.  If the product doesn’t sell, Costco will ship all the product back and SPNG will refund Costco’s money.

- SPNG is driving eyeballs to their product. Successful cross promotions with MLB and Sponge Bob is increasing the profile of SPNG exponentially.  They are being sold on television, even.  On our board, our members have mentioned seeing ads for SPNG everywhere.

- They are making money….well, at least they are driving top-line revenue.  With the increased ad spending and other costs, I will be curious to see what.

- Becoming a NASDAQ company.  Hanging over this whole stock equation is the stated desire of management to become a reporting company.  It will require a reverse split of some huge number due to their bloated capital structure, but will be a good thing in the long run.

Conclusion: the stock has already popped the magic .20 range and it is marching on.  Remember that it is in uncharted territory and could fall off fast.  It is so far above the 50 and 200 MA that they almost have no relevance to the stock or its direction.  Watch the chart and keep a tight stop.

JAZZ

JAZZ, in my opinion, is a creature of good news.  It has shot up an amazing 300% since Wednesday gapping up sharply in early trading on that day and continuing a multi-day run.  Any pharma company that releases news has the potential to shoot up like JAZZ did.

To look at the chart, you can see that both the MACD and stochastics are still bullish, but the question is “how much farther can it run).  Their financials are terrible – huge losses  (although narrowing somewhat) and some very real liquidity concerns.  The shares opened up sharply today, but have given back some of that gain.  It doesn’t appear that heavy profit-taking is going on, but be careful.

Conclusion:  Watch for a short opportunity on this one.  I don’t think the run will continue and JAZZ will be pushed back to the $1 mark within the next few weeks.

SPNG is a hard stock for me to get a read on.  It is a darling of the sub-penny crowd and averages 39 MILLION shares traded daily.  On Monday, volume spiked to 82 Million shares for no discernible reason.  But, “four-digit stocks” can do that.

What about SPNG makes it such a play?  Here is what we know:

• It appears to be a real company…based on published financials!
  • The company is profitable
  • It has positive net income and cash-in-bank
  • It has positive retained earnings (just turned positive in this fiscal year)
  • I would even say that it has a strong balance sheet….good cash, great ratios, no debt
  • Here is their website:  http://www.spongetechs.com/
    
• It is in a commodity business … It makes sponges!
  • But, it has real products that are being sold in real stores
  • It is doing a great deal of work to differentiate its products
    • Sponge Bob, Square Pants product line appears to be driving some nice sales increases
    • It is making noises about expanding to other specialty markets:  Health, Beauty and Medical
• They use stock like I use toilet paper
  • If you read their SEC filings, everyone (and their brother) is being compensated with stock.
  • Their market cap is only $13.5 Million
  • They have a whopping 723 million shares issued and outstanding
  • Float is 390 million shares (insiders hold 51% of stock…which is usually a good thing)

Oh, by the way …. you can tell I love bullet points.  I am not going to bore you with a long dissertation.  I am not a CFA, so I don’t have to adhere to the dull, dry and boring way that they do writeups on companies.

The stock has traded in a range from .01 to .06 over the last year.  It would be nice to buy at the current .0199 ask and have the stock rebound to the .06 range and above.  The question I have is how can that move occur.  Current management play the press release game well.  Every they do is accompanied by a press release.  So maybe NEWS will do it.  Management is driving the company to profitability and strong sales growth.  So maybe FUNDAMENTALS will do it.

However it occurs….I think that SPNG will be a darling of the penny stock crowd.  Already the volume spikes are proving that.

IMO … the best way for SPNG to graduate from the sub-penny world is for someone to throw a bomb in the middle of its capital structure … reverse splits, stop using stock as toilet paper, stop diluting your current shareholders every single frigging day!

Be careful with SPNG, but don’t be afraid to play it.

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