Even though STW Resources Holding Corp. (OTC Pink: STWS) is not typically the type of stock I buy, I have been watching the stock since early this year. The company originally drew my interest when it filed all of its 10-Qs for 2013 on the same day in February 2014. While this is usually not a sign of anything good, I thought it was worth a look. Upon review, I was intrigued by the fact they actually seemed to have an actual business with revenue. However, the balance sheet was weak and it did not seem worth the effort to investigate further at the time so I just stuck it in a watch list.
Fast forward to June 20, 2014 when the company filed its 10-K along with a press release that contained an outlook for the remainder of year. Revenues, while still small, seemed to be gaining steam and it was producing from two income streams – water desalination and oilfield services. The company also commented that it had turned the corner and was posting positive cash flow on a monthly basis. At the time, I still did not see this as an investment, but the news seemed good enough to catch the attention of other investors. I decided the downside with the positive news was limited and there could be a quick jump higher, so I put some money to work in STW as a short-term trade only. Shares did move briefly higher and staying true to my short-term trade strategy, I took advantage of the move and sold. It was not a big winner, but probably worth the time.
Since I made the trade, I continued to read some press releases by the company, but there was nothing that piqued my interest. Especially since shares had moved even higher since I sold. I thought I was taking a big risk when shares were at only $0.10, but now they were trading as high as $0.19. Then, out of the blue, the stock started to move higher. By the end of July shares were trading at $0.25. I had no explanation. There had been some contract awards in June, but in the penny stock world you usually want to see the money first. I am always amazed at the number of companies awarded contracts and then nothing ever happens.
I presumed maybe the stock had just been attracting some attention with its press releases and investors were taking positions ahead its impending 10-Q filing which is currently well over two months past due. For me, I had better places to put my money or so I thought.
All of the sudden on August 1, 2014, the stock of STW rockets nearly 57% higher to $0.40 per share. If that wasn’t enough, shares tacked on another 60% the following Monday which was August 4th. I checked for press releases, SEC filings and the company’s website to get any hint of what might have prompted the stock to rise 151% in just two trading days. Nothing…
Then on Tuesday, August 5th, STW put out a press release announcing it had signed a contract with the City of Ft. Stockton, Texas. Huh? So the stock rises 151% two days prior to the announcement on high volume, then drops when the market opens on announcement day, and has been generally weak since as if someone is taking profits. It sure looks a little suspicious to me. This could be just another pump-and-dump, but seems unlikely with a news release a day after the massive two-day run up. I don’t follow pump-and-dumps, so if anyone has information that this stock was being promoted, feel free to comment.
STW Resources is most likely not on the radar of the SEC, so any investigation of the abnormal trading is highly unlikely. I suspect someone was aware of the news regarding the contract with the City of Ft. Stockton. Then the individual or individuals proceeded to use their access to the inside information in order to make a nice chunk of change. Call me a skeptic.
Disclosure: The author did not own shares of STWS at the time this article was published, but did briefly own shares in June 2014.