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Worth it's weight in oil??? Beware OB equities...

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September 27, 2012 – Comments (11) | RELATED TICKERS: ABHD

Blogs into pitches or pitches into blogs.  Best of TSIF for reveiw or comments:

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AbTech Holdings has a reputation as an equity that is either loved or hated. Unlike some OB stocks "pig piled" here on CAPS, it's not likely a scam, although it's beginnings have many of the characteristics one might find for an OB stock, (reverse merger from a non-profitable owner, intermittant "advertising", minimum owner equity, negative cash flow).  It may be a rogue gone good and I am giving it the benefit of the doubt that it is working hard to make it in the "real world". Like many OB stocks, however with a $40 Million market cap, it's well ahead of it's valuation. Providing a "good thing" in a multi-Billion market does not justify a $40 Million market cap at 51x P/S when you have a negative book value, and negative cash flow.

What some "investors"/"speculators" do not understand about OB stocks, including Abtech, is that they are predominantly owner held with a large share count that was derived with NO corresponding owner equity installed. They are typically the size of a 5-20 person new/small business (Abtech cites 21 employees) that gets to the stock market through the OB boards with no oversight. The cost of the filing and listing is sometimes more than the total income of the company.

AbTech Holdings recent award from the third annual World Shale Oil & Gas Summit for it's Smart Sponge resulted in some nice attention such as this article in Forbes.
http://www.forbes.com/sites/christopherhelman/2012/09/21/shale-gas-frackers-get-excited-about-a-new-sponge/?partner=yahootix

The Smart Sponge can be used to soak up oil in the fracking process. In addition it's being used in waste drains in some major cities. Waste Mangement partnered with them to swap out the "sponges". The two markets are $1.2 Billion and $7 Billion. That's not counting possible use in other areas. AbTech offered it's services during the BP oil spill and "according to them", was rejected because their product was "too good" and would decrease time/profits of clean-up crews.

(Waste Management did NOT input new money into Abtech, they merely agreed to offer Abtech products and maintain them for a cut of the proceeds. Low risk).

A miracle product in a much needed field. Additional changes could help make the sponges burnable, especially in the fracking field, resulting in double use.

So how can I be negative about a multi-Billion product. Back to valuation. Read the last paragraph in the Forbes Article. Despite the promise and the contracts, AbTech is bleeding money and is a "going concern". Could that change. Yes, certainly, but at what rate. Could someone buy them out for their "promising technology". Certainly, but at what price.

The founders have very little invested in this company, yet it has a $40 Million market cap. $580K in revenue the first six months, but a loss of $5.4 Million last year. Can they grow revenue? Yes, but not without a corresponding increase in SG&A. So far they've found enough backers to keep the lights on. They have NO money to proceed expanding or to front contracts. IF someone invests in them it will be at the continued dilution of any current outside stockholders and investors will get all the guarantees and most of the rewards.

Do you want to be in on the ground floor? I think that's a risk worth taking with a small portion of my investment, but this is NOT the ground floor when the the 49 Million shares outstanding resulted in little shareholder equity and you're buying in with new money at a negative $0.14 per share value....you're buying their debt....

Ground floor is sharing the pain and gain, not funding a Million dollars worth of annual officers salaries, and a half million in SEC filings on a 14 employee company that got to the OTC boards through a reverse merger with 40 Million Paper shares that had nothing to do with smart sponges.....

There will be people who continue to speculate on Abtech gaining "Billions". Some investors/speculators think that current valuation has no meaning. If you're one of those pony up. You might be right once.....but I doubt it.

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A few OB companies can mature, but it's really hard when you're share count is from a reverse merger and not funding.

http://biz.yahoo.com/e/120814/abhd10-q.html

"Overview

ABHD was incorporated in the state of Nevada on February 13, 2007 under the name Laural Resources, Inc. On February 10, 2011, ABHD consummated the Merger with AbTech, pursuant to the Merger Agreement. Prior to the Merger, ABHD was a development stage company engaged in the business of acquiring and developing mineral properties, and a public reporting "shell company," as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result of the Merger, ABHD acquired all of the issued and outstanding common stock of AbTech (through a reverse acquisition transaction) in exchange for the stockholders of AbTech acquiring a 78% ownership interest in ABHD, AbTech became ABHD's majority-owned subsidiary, and ABHD acquired the business and operations of AbTech"

 

 - TSIF

11 Comments – Post Your Own

#1) On September 27, 2012 at 5:31 PM, awallejr (76.71) wrote:

I am on the other side of the fence heheh:

 http://caps.fool.com/Blogs/abhdob-a-pump-and-dump-or/692946?source=itxsitmot0000001&lidx=2

But since I classified it as a "speculation" pick I recognize the risks.  I like the product and am actually "rooting" for its wider utilization.  As to whether management can accomplish that time will tell.

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#2) On September 27, 2012 at 5:38 PM, Mega (99.96) wrote:

"Unlike some OB stocks "pig piled" here on CAPS, it's not likely a scam."

According to awallejr, the CEO claimed on a radio show that they expected to do $17-20M revenue in 2012.  That sounds like an egregious ethical and legal violation.

http://caps.fool.com/Blogs/abhdob-a-pump-and-dump-or/692946?source=itxsitmot0000001&lidx=2

The Forbes article claims that "[WM] is marketing the stormwater applications to its thousands of municipal customers."  This would be easier to believe if they had sales, support or product data pages or mentioned it anywhere outside 2 press releases.

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#3) On September 27, 2012 at 6:01 PM, Mega (99.96) wrote:

WM may not even provide any significant wastewater services - I don't see it listed on their website.

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#4) On September 27, 2012 at 6:41 PM, TSIF (99.96) wrote:

awallejr, I saw your blog and some of your comments. You look like someone looking for information and trying to do some due diligence. I'm not against having a spec pick in my portfolio, assuming I will lose all or a majority of it. BUT, spec picks shoudl be based on something.  Your "rooting" and "like the product" completely negate any "current" valuation metrics, or to MegaShort's point, the company making legitimate claims as to it's future.

Speculating and "hoping/rooting" should have a clearer deliniation mark.  Can you speak to anything about this company that points to a $40 Million Market Cap despite it's "going concern" from lack of capital and it's highly negative cash flow??

Megashort.  I try to give a few of the OB companies that actually make a product, even with only a half a million in sales, the benefit of the doubt, but I agree that is VERY difficult to do, and a stretch in some cases.  thanks.

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#5) On September 27, 2012 at 7:18 PM, Mega (99.96) wrote:

Well I agree, the product does sound pretty cool.

If they had a much lower valuation and non-shady management, I would be interested in them.

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#6) On September 27, 2012 at 7:31 PM, awallejr (76.71) wrote:

Actually I disagree TSIF, I  prefer investing in things I like.  I don't invest in tobacco companies, and don't fault others that do.  Whenever you are looking at a new and useful product it is worth consideration as to if you like the product, you think it could sell well and has a clear useful use (stormwater drainage is a growing problem and fracking has its concerns).

The test is whether this management can pull it off.  We will actually know in a quarter or 2 where things are headed I suspect.  Whether it currently has a $40million market cap is unimportant at this stage.  Penny stocks fluctuate wildly. That was my mistake in my choice in Harry's "Dividend" contest.

I think when looking at these penny stocks, the potential viability of the product should be the main concern.  

It won't be the first time I backed the wrong horse if this stock tanks.  I liked Alife once heheh.

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#7) On September 27, 2012 at 8:15 PM, TSIF (99.96) wrote:

Understand where you're coming from awallejr, been there myself, but what you like and whether they can actually make or sell it at a profit and what their valuation is should have some correlation, even in a startup (which this isn't).  They didn't acquire any mineral properties, (and I like minerals...:)) but came out of it worth $100 Million before they even had the smart sponge idea.  Good luck!  I think you are being sponged, and a quarter or two won't change things.....

I will say that it will be volitile with mostly insider holding and a low float/low volume.  This means that the high beta will continue on "press releases".

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#8) On September 28, 2012 at 2:18 AM, awallejr (76.71) wrote:

You may very well prove right.  But I really am rooting for the company since the product has real value. And I like minerals too;)

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#9) On September 28, 2012 at 10:10 AM, TSIF (99.96) wrote:

I think they would do better if the sponges were square and sang songs in thier "off time", but then again, that's just me..... :)

Thanks for the thoughts....

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#10) On September 28, 2012 at 9:33 PM, HarryCaraysGhost (99.59) wrote:

That was my mistake in my choice in Harry's "Dividend" contest.

Don't call it a mistake yet man, we have a long way to go.

As far as ABHD.OB  goes my first inclination would be to red thumb it. 

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#11) On September 29, 2012 at 2:08 AM, awallejr (76.71) wrote:

I dunno Harry, these contests tend to favor the penny stocks.  If you hit you score big. CWTR is kicking butt.  BravoBevo should be having you wearing the apparel heheh.

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