Gediminas Jasionis
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Ram Power Corp (TSE:RPG) (PINK:RAMPF) Stock Balances on the Verge of Breakdown

by Gediminas Jasionis Apr 28, 2011
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prg_chart.pngRam Power Corp (TSE:RPG) (PINK:RAMPF) stock price was shaken by recent news and currently trades near an important support level, looking to break down into a new multi-year low.

RPG gapped down 16.85% yesterday on strong volume of 2.27 million, which was nearly 4 times the average. News was mixed lately, but this particular event was called out by a units offering disclosure made on April 26.

The shares continued to decline in value after the company offered for sale $50 million worth of common shares and warrants combinations.

Just a day before, the price was kept in place by a positive update on the completion of two wells drilling, targeting to make use of geothermal energy on San Jacinto-Tizate project in Nicaragua and Orita project in California.

These two developments are affecting the share price in different ways. It is currently at a very important support. If it breaks further down, a major collapse could happen if selling pressure proves to be stronger.

A renewable energy company is running on a fundamentally impaired balance sheet, that's why they desperately need more cash.

  • Revenues are flat;
  • Quarterly losses decrease, but remain significant;
  • Capital structure is far from optimal - most of the capital is concentrated in hard assets, leaving comparatively little liquid assets at management's disposal;
  • Short term liabilities top current assets.

ram_power_logo.jpgLosses are mostly offset by issuing more debt. This causes potential dilution and on top of that the company turned to equity funding, thus a negative reaction is understandable.

The only good thing is that the market cap currently stays at only a third of the net tangible worth of the business. This might prove to be a good buying opportunity if Ram Power manages to pull it together.

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