shares fall below $1; traders see further decline
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[July 29, 2014]
By Rodrigo Campos
(Reuters) - Cynk Technologies, which was briefly worth billions of
dollars last month, saw its shares fall below $1 on Monday, and
traders say it is only a matter of time before the stock is once
again worth next-to-nothing.
Cynk became a big market story as trading volumes soared and the
company was briefly valued at more than $6 billion despite having no
revenue and being described as "development stage."
Trading was halted by U.S. regulators on July 11 for 10 days. Since
that suspension ended, trading has been solely in privately brokered
transactions, and brokerages are not allowed to solicit buyers or
The stock dropped to 60 cents a share on Monday, after hitting a
high of $21.95 on July 10. Most traders interviewed said the stock
is likely to keep falling until it is once again worth no more than
a few cents. Volume-weighted average price was $1.04.
On the sole day in May that Cynk shares traded, Cynk was worth 6
cents a share. On April 9, the only day it traded that month, the
stock was at 8 cents.
Among the reasons cited for the current price was the minimal
liquidity. With a thinly traded market, sellers have a bit of
additional leverage, preventing the price from dropping to pennies.
In addition, short sellers who had borrowed the stock were also
buying it to close out positions, also elevating the price a bit,
On Monday some 191,000 shares exchanged hands. Some 31,000 of those
were traded through KCG Holdings and 32,000 more through Canaccord,
according to a source familiar with the trades.
A trader at Canaccord, who would not identify himself, said any
volume was attributable to short covering -- traders who are buying
because they had borrowed stock to sell it on the expectation of a
price drop. KCG did not respond to requests seeking comment.
Traders at other firms declined to go on the record because they did
not want to be associated with the trading of the stock.
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Trading in Cynk stock was halted by the Financial Industry
Regulatory Authority and later suspended by the U.S. Securities and
Exchange Commission on July 11. It closed at $13.90 on July 10, for
a market value of $4.05 billion. At Monday's close of 60 cents, the
company is now worth $174.9 million.
The SEC had no comment, and FINRA was not available for comment.
"There’s no revenue, no employees, one person has an office in some
foreign country and yet traders and investors somehow saw a reason
to bid this thing up like crazy. I’m at a loss to explain it because
it doesn’t make sense to me,” said Ken Polcari, director of the NYSE
floor division at O’Neil Securities in New York.
"Once it collapsed it should have gone to zero. Why is anyone still
paying anything for it is beyond me."
Volume in Cynk soared to almost 470,000 shares on Friday, the most
on any day, but the stock traded off exchanges and only on buyers'
or sellers' request.
(Reporting by Rodrigo Campos; Editing by Leslie Adler)
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