In light of the poor performance of the stock and some data contributed by OTC Journal members I decided to caution everyone to use a stop loss in the $2.80 to $2.90 range on ZAPZ. If, in fact, it turned out there were indeed millions of warrants exercisable at $1.20 in existance, it would have been a major technical problem for the stock.
The SEC filings were not specific concerning the number of warrants in each particular class, and there were some clues concerning total potential dilution. However, as is often the case, the SEC filings do not tell the entire story.
As the editor of the OTC Journal I have the advantage of being able to talk directly to management. They know once I have the accurate information, thousands of investors will know.
In the case of ZAPZ the number of warrants currently convertible at the $1.20 stike price is far smaller than the filings imply. In the next several days I will have complete dilution table, and know the accurate numbers.
The preliminary numbers indicate there are only about 400,000 warrants held by investors convertible into the stock at $1.20. This only represents a few trading days of volume, and therefore is not nearly as potentially harmful as originally envisioned. A much bigger problem is the warrant holder shorting the stock against his position, then covering instead of converting. This allows the investor to use the position to make money without converting and hurt the trading pattern simultaneously. It would not be an illegal naked short, as the short is “covered”.
As it turns out, most of the $1.20 warrants are held by management, and therefore subject to many trading restrictions. Most other warrant conversion prices are at $5 and $8.
Current estimate: Only 7 million shares in the public float at this time. Again, subject to confirmation in the next few days.
The technical picture on the stock is improving, and I believe a rebound could be in the cards. As you can see, the stock did violate the diagonal blue uptrend line. However, once it dropped just a little below a perfect 61.8% Fibonacci retracement, the stock rebounded.
I believe the stock sold off once the news came out simply because a lot of investors knew the company would report a milestone, and had bought out in front of the news looking the sell. The old Wall Street adage “BUY on mystery, sell on history” would apply here.
On the fundamental side, the company has the potential to kick butt. I chose to be conservative on the dilution issue because of a couple of bad ideas last year with a similar problem.
I am reversing course now that I have more facts. I believe the stock is a buy right now.
Well I got my buy at the 2.80 mark and now I am hoping it will consolidate between the 2.75 and 3.00 increms for about a month or two before a rebound, then it should shoot pass the mar 10th high of 3.69, would you agree that this sounds like a good plan?
Editor: I think the time frame will be shorter than you envision, but that and $5 will get you a cup of coffee at Starbucks. Very astute trade. Buying at the 61.8% retracement on a company that is headed in the right direction seems to work out most of the time. Eclipsing the old high would be wonderful.
I have been noticeing that ZAP has been having a nice increase in price with regards to a low volume. I am curious to rather this is a good thing and whats going on when this is happening?
Editor: It suggests an absence of sellers at the current level, which, in my view is a good thing.
I have had personal conversations with Steve Snyder of Zap. The company has been making very misleading statements about the mileaga capability of the more than 2 year old smart cars that they are trying to market in the US. Fusion bailed out as the result of failed due dilihgence. The EPA rates the car at 37 mpg city and hwy. Mr Snyder says he knows someone who got 60 mpg and that is a mileage figure that they were using. In contrast DaimlerChrysler promotes their diesel model on sale in Canada (capable of actually getting 75 mpg!) as getting in excess of 60 MPG. The Diesel smart forTwo is truly a 3 liter car ie. capable of going 100 KM on 3 liters of fuel (diesel) The European MPG figure converted to Miles & US gallons for the gasoline model model is 39.87 city/58.8 hwy and 50.04 mpg combined. other factors that will limit the market aare the quirky handling characteristics and lack of solid resale value for the car.
Editor: See comment above- it doesn’t matter to shareholders. All that matters is that they can sell the cars.