Camber Energy Inc (NYSEAMERICAN: CEI) stock was down 20.26% during premarket trading and was set to open lower for the fifth consecutive day as investors cut their losses and short-sellers pushed the stocks towards zero.
Yesterday’s massive 50% drop was triggered by a scathing report published by Kerrisdale Capital detailing the oil company’s wrongdoings, including not filing its financial statements for over an entire year.
The report also detailed how Camber Energy had misrepresented some critical facts about the company, including its ballooning share price driven by the impeding conversions into shares of outstanding convertible notes and other loans.
Camber Energy is also stuck with some bad loans that require it to pay an annual non-cash dividend of 24.95% due to a preferred share structure that gives significant control of the company to the Discover Growth Fund.
The company continues to issue preferred shares in exchange for debt, having accumulated convertible debt worth $20.5 million over the past year, further diluting shareholders after the conversion.
The report by Kerrisdale Capital also focused on Camber Energy’s primary subsidiary, Viking Energy, of which it owns 73%. The subsidiary had $15 million in negative shareholder equity, with 48% of its $101.3 million debt maturing in 12 months.
Viking is clearly in dire financial straits, but this was not all; Elysium Energy, a Viking subsidiary, is in violation of a secured debt covenant, which means that the debt is most probably due now.
Viking is also accused of having a fictitious CFO for several years between 2014 and 2016 in Cecile Yang, a Shanghai, China resident. Viking’s founder used to forge her signature to sign official documents whenever needed.
The report also faulted James Doris, the CEO of both companies, for letting the founder’s practices go unreported since he had no problem with the arrangement.
Investors who bought Camber Energy shares since the start of September driven by recommendations on social media and kept buying up to their prior high of $4.84 could be sitting on massive losses if they did not take profits on their positions.
Investors should carefully analyse the recommendations issued by influencers as they could lead to massive losses for those who buy at the peak of the meme stock rallies.
*This is not investment advice.
Camber Energy stock price.
Camber Energy stock has fallen for the past 5 consecutive trading sessions as investors flee.
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