GeoBio Energy, Inc. (OTC: GBOED) is a house of cards that is about to crumble. Mark our words.
The 1-5500 (yes that’s five-thousand five hundred) reverse split left shareholders devastated but reduced the number of shares outstanding to roughly 2.2M. Yet, on December 6th, over 68 Million shares traded hands in the market.
Investors working through broker-dealer Scottrade were erroneously cleared for liquidating what little holding they had left following the reverse stock-split.
Anonymous posters on numerous online message boards wrote suggesting that this error would create a ‘short squeeze’, a process whereby a seller of fictitious shares anxiously attempts to cover his or her ‘short’ position, causing the market price to soar.
With most of the key items laid out, let’s analyze the situation logically.
First, message board posters tend to be traders. This breed of investor is ruthless, egotistic, and tends to offer biased opinion.
For a trader with a vested interest in GeoBio Energy, Inc. (OTC: GBOED), it is in their best interest to promote the stock in an attempt to increase the price per share. A small jump in share price can turn a surprisingly large profit.
Second, after experiencing such a dramatic shift in share structure, one might infer that shareholder-management relations have shifted slightly as well. Investors are eager to recover whatever portion of the hard-earned investment dollars the greedy son-of-a-bitch CEO stole from them that they can.
Investors’ prayers have been answered with the stock trading above the split-adjusted price. Shares have bloated as much as 779% since Monday. And as we all know, you can only fill a water-balloon with so much water…
Third, a company that just screwed shareholders with a 1-5500 reverse-split isn’t exactly an honorable entity. They will screw shareholders again. And again.
By diluting the market with additional shares, the stock price will begin to fall. And whether you’d like to believe it or not, this house of cards will crumble faster than you can say ‘GBOED’.