Kit Digital Inc. (PINK:KITD) Enters the Pink Sheet Arena
Buying a cat in a bag is not advisable, yet this is what the new face of Kit Digital Inc. ( PINK:KITD ) offers. The stock attracted our attention with rising volume and daily gains for the last trading days of the year, yet the company raises several red flags in a high-profile story. Kit Digital is the latest brainchild of young entrepreneur Kaleil Isaza Tuzman, famous for failed company GovWorks.com and the star of biographical documentary Startup.com. It seems yet another venture of his has fallen on hard times, though some sources claim Tuzman has not been with the company since April 2012 and only remains listed as a CEO. The company had a rough ride in December after it got a warning and finally got de-listed from NASDAQ to continue to trade as a pink sheet with incomplete information and a skull and bones warning. The first warning came on December 10th, followed by notices pointing out reporting inconsistencies and the stock stopped NASDAQ trading a day later. In the past two years, the ticker went down from $16 to $0.63, taking a serious beating. After court disputed with Nokia Inc. ( NYSE:NOK ), the company is left with the following financial strengths and weaknesses, vying for attention as a pink sheet ticker: $30,562 cash $357,063 current assets $125,336 current liabilities $103,895 net loss While buying interest has resumed for the ticker, we need to be reminded what happened when stockholders discovered the company did not comply with accounting practices. The news wiped out their investment and now shareholders who purchased stock between may 19 2009 and November 21 2012 started a class action suit against the company, with losses exceeding $100,000. In the future, we may expect the KITD ticker to behave like a pink sheet, with great daily fluctuations, and as the court news unfold, they may affect negatively the stock. Currently, the pink sheet listing holds a caveat emptor warning. Our database holds no data for previous KITD promotions and the digital video technology firm seemed to be doing a reasonable business before the de-listing and reporting scandal. The news releases started at the beginning of December and don't seem to be targeted to attracting the attention of investors. Kit Digital changed identities twice in its history through restructuring, so another name change may be possible and a promotion to follow. If this happens, it's best to keep in mind the fundamental activity of the company to avoid falling for artificial hype. The KITD stock added more than 9% on Tuesday's trading and almost doubled its price since December 24th, but it has shown potential for panicked selling on bad news and deep losses within a day.