After two seriously speculative surges and a recent 52-week low, Portage Resources Inc (PINK:POTG) has found itself again at the challenge of the psychological $1 border.
In fact, two days ago POTG breached the support and yesterday it went further down to $0.082. While the stock bounced and plunged this week the trading activity was conspicuously higher than usual.
This was mainly due to the large awareness coverage of the stock which has been tracked by the OTC Markets news service. Various trade alerts and research reports popped up this week to discuss POTG future on the market.
It takes only a glance at the capital structure of this member of the gold penny stocks family to see the future of POTG stock. The main point here is the current market valuation of the company.
OTC Markets show that the current market cap of POTG is $365 million which is way over the top for a pink sheet company. Especially for a company which is still in the pre-exploration stage, and has only $720 in total assets.
Moreover, between July and August this year the company has issued nearly 400 million new shares which is a dilution tsunami for common investors. The company has almost reached its total number of shares authorized which is 5 billion.
Once POTG hits this cap it will either have to make capital reforms, make a reverse split or find other ways to fund its gold mining ideas. There is no need to mention that the former two methods will hurt shareholders and the latter method is very unlikely.
The two speculative surges of POTG stock had burnt a lot of investors who were (and still are) driven by the gold price frenzy. And before more unseasoned investors open positions in POTG they should first estimate whether POTG is overvalued or not based on the facts mentioned above.
Junior gold mining stocks are the rave of the day but one should not lose sight of the broad aray of low price stocks.
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