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Latitude 360 Inc (OTCMKTS:LATX) Is Today's Penny Stock Focus

Latitude 360 Inc (OTCMKTS:LATX) Is Today's Penny Stock Focus
Written by
Jarrod Wesson
Published on
September 27, 2017
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Something interesting is happening with the stock of Latitude 360 Inc (OTCMKTS:LATX), a restaurant chain, which filed for Chapter 11 recently and seems to be restructuring at this point in time. Marketing Materials from the companyOn September 21, 2017, the share price increased as much as 325% in only one session. That was not all; more than 100 million shares changed hands in only one day. Have a look at the market reaction: 1 month chart for LATXDo you know the most interesting factor here?The most remarkable is that the company did not release any new information about the business to make the share price increase. When such type of movement happens, we usually review external stakeholders, such as new owners buying shares, market manipulation etc.In this article, we will explain what might have happened. Furthermore, we will explain how the OTC Markets is reacting to the unexpected volatility.Business and Recent DevelopmentsAccording to the last annual report received by the market, the company was created on August 22, 2006 and on May 30, 2014, a merger was executed with Latitude 360, Inc., a Florida Corporation. In our opinion, it a was reverse-merger completed to access the financial markets; a great idea, as the company was able to obtain cheaper financing, and execute other business combinations.The business model was explained with the following terms:

"We are a full-service upscale casual dining restaurant/entertainment company that plans, develops, constructs and operates state-of-the-art, 35,000 to 85,000 square foot premier, award-winning restaurant/entertainment venues, which we refer to as restaurant entertainment centers. We currently operate three restaurant entertainment centers, in Jacksonville, Florida, Pittsburgh, Pennsylvania and Indianapolis, Indiana, and are in the process of designing or constructing additional restaurant entertainment centers in Albany, New York, Minneapolis, Minnesota, and South Boston, Massachusetts." Source

As of December 31, 2014, the company was said to have 477 employees. But, it seems that recently many things have happened inside the company.In January 2017, lawyers from debt holders of LATX filed chapter 11 and claimed that the company needed debt restructuring and had been mismanaged.That's not all; some months later, the employees said that they could not cash the company's pay checks. Ex-employees expect to start legal actions against the firm.Little information about the Chapter 11 has been given to the market. Additionally, the last quarterly report was released for the period ended June 30, 2015. wherein the amount of employees shown on the OTC Markets website is 500 as of September 30, 2015. Hence, the information seems to be a bit outdated.So, why did the share price jump? - Low float may be the reasonThat's the interesting fact. On September 21, 2017, the share price increased and returned more than 300% in only one day with no news. We have thought about several case scenarios:

  • The company is finally paying employees: Perhaps some market participants got to know this fact and are buying. It could happen, but given the current state of the balance sheet, it is unlikely.
  • Short sellers are closing their position: This could be liable scenario, as the stock price has fallen quite a bit and they may be closing their positions rapidly. This type of behavior could create the stock pattern seen.
  • There is very low float: We believe that it is the most likely explanation. Let us explain the share capital structure so that readers can understand.

The share capital as seen in the OTC Markets website is:Market Value$197,452a/o Sep 22, 2017Authorized Shares500,000,000a/o Oct 31, 2015Outstanding Shares179,502,125a/o Oct 31, 2015-RestrictedNot Available-UnrestrictedNot AvailableHeld at DTCNot AvailableFloat35,241,301a/o Oct 31, 2015Par Value0.001SourceWhat did we learn?The float is very low. There are approximately 179 million shares outstanding and only 35 million shares are owned by the public. Thus, if anyone wants to buy or sell a big stake in the exchange, the share price would change quite a bit to be able to absorb the entire demand.What did the OTC Markets exchange do? - ConclusionThe OTC Markets Exchange rapidly reacted by putting the Caveat Emptor signal on the company's website: Caveat Emptor SymbolWhat does it mean?This means that buyers need to exercise additional care and perform thorough due diligence before making an investment decision in the stock. The company could have been engaged in one of the following activities or one of the following events that took place:

  • Promotion/Spam without Adequate Current Information
  • Investigation of Fraud or Other Criminal Activities
  • Suspension/Halt
  • Unsolicited Quotes
  • Other Public Interest Concern

To sum up, it seems that some market participants are playing volatility games with this low float company. However, even if some people are making good stock returns, we need to be careful about this name. The OTC Markets placed a bad note on the stock, thus this should not be touched until the picture becomes clearer on what's happening with LATX.We will be updating our subscribers as soon as we know more. For the latest updates on LATX, sign up below!Image courtesy of nathanpmi via FlickrDisclosure: We have no position in LATX and have not been compensated for this article.

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