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Alumifuel Power Corp (OTCMKTS:AFPW) Is On The Radar After Reverse Merger Bid

Alumifuel Power Corp (OTCMKTS:AFPW) Is On The Radar After Reverse Merger Bid
Written by
Jarrod Wesson
Published on
March 26, 2018
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While Alumifuel Power Corp (OTCMKTS:AFPW) has declined a lot in the last two years, yet there are market participants believing that there is a buy the dip opportunity here. The fact that we are at 52-weeks lows, as well as the stock volume of 3 billion shares, justify this initial thesis. Have a look at the price action in the chart below: 2 years chart for AFPWWith the stock trading at the $.0001 candle, the stock needs to close above the $.0003 level to affirm the upward trend. On the downside, a close below the $.0001 level would be worrying for the long side. However, given the current volume and the buying pressure at this level, we don't see downward movements very likely. Check the following one month chart to form your personal opinion: 1-month chart for AFPWBusinessThe company is headquartered in Englewood, Colorado, and was founded in the year 2000. AFPW bits itself as an early production stage alternative energy company that is pursuing hybrid renewable energy systems for a number of backup power applications. The company owns a subsidiary named NovoFuel brand with a new line of high capacity lithium-ion batteries as well as patented and proprietary technology that generates hydrogen gas through the chemical reaction of aluminum powder, water, and proprietary additives. Additionally, the company recently formed another subsidiary called Energy Staffing Solutions, Inc., which has entered the temporary staffing industry.[embed]https://www.youtube.com/watch?v=eikfArKjQ50&[/embed]What's going on? - The CEO received a bid from a third partyWhile the management has not issued new corporate documents in its recent history, the Twitter and the blog of the CEO, Ryan Schadel‏ @CRyanSchadel, has remained very active. The most significant information from the social media is the following. After the previous CEO of AFPW passed away unexpectedly in December 2016, the management decided to reduce the "unanticipated" operating risk and increase liquidity by selling some assets. In line with this rationale and given the debt with debtholder Labor SMART, Inc., the current CEO finally decided to execute a reverse merger acquisition with another party. In our opinion, it is a good move. Debtholders should appreciate it because the company would become large and less risky. Additionally, such a transaction should help recapitalize the balance sheet. Also, it should help the company become profitable again.The most important question right now is whether the company will find a buyer with sufficient cash in hand. So far, the market got really excited since the first candidate signed a non-disclosure agreement with AFPW. The following is a photo taken from the blog of the CEO: Blog - Alumifuel Power Corp OTCMKTS: AFPWWhile the market does not really know the name of the bidder, yet other companies announced negotiations for a transaction at the same time: Twitter - Alumifuel Power Corp OTCMKTS: AFPWWhat's our take? Until both companies reveal the name of the other party, we don't believe any rumor or speculation. In our opinion, the increase in market volume shows that many believe that a reverse merger with this candidate could happen. We cannot blame them. However, readers are warned. Usually, information in the market is wrong and people lose tons of money. The "Buy the rumor and sell the news" many times does not work.Information about the CEO and shareholdersAs it is usual on the street, good news comes with detrimental news about the company, the shareholders, and the management. In this case, we found comments on iHub about the lack of negotiation skills of the CEO. According to the post, the CEO sold convertible bonds in 2018 and received very little cash: Negotiation Skills - Alumifuel Power Corp OTCMKTS: AFPWWhile it is true that the bonds were issued, yet we believe that we don't own sufficient information to say that the deal was bad. In our opinion, the forum member does not have it either. The company did not recently release the state of its balance sheet, thus we don't know whether the company needed cash when the bond was issued. Please, take into account, for example, that when CEOs need cash to pay employees, they sign any deal. It may be the case here.On the same forum, ihub, there is also certain information about one of the shareholders, Labor SMART, Inc. According to another forum member, the company's tax status is delinquent, and the CEO failed to get it recognized by the market participants. Please note that the current CEO of AFPW, Ryan Schadel, is also the CEO of Labor SMART, Inc.In our opinion, if this information is correct, it could damage the merger negotiations with the other company. We encourage readers to stay tuned to this forum. Market participants are doing excellent due diligence on this name.ConclusionWith a market cap of $0.3 million, ‏AFPW is an interesting story. There are 3,905,907,250 shares outstanding and a float of 23,321,630 shares. As a result, the order book should be quite empty, and market orders may create a lot of swings. The share price volatility is expected to be very high. That's another reason to proceed carefully on this name. While good news about the merger could deliver overwhelming stock returns, the trading losses could also be large if the transaction does not occur.To sum up, there are many catalysts on this name, so it will remain on our radar. We will learn something here, that's for sure.Disclosure: We have no position in AFPW and have not been compensated for this article.Image courtesy of David Hepworth via Flickr.

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