Shares of Cereplast Soar Over 300 Percent in Two Days as Company Avoids Default

Shares of Cereplast Soar Over 300 Percent in Two Days as Company Avoids Default

By: AllPennyStocks.com News

Wednesday, January 23, 2013

Most traders dream of multi-bagger plays, meaning trades that move more than 200 percent. Honestly, it is the reason that most delve into the speculative world of penny stocks; fast and large gain potential. The reality is that it can be difficult to realize and secure gains of that nature. It takes a discerning trader willing to conduct the necessary due diligence and often times have the technical analysis skills to know when to take the profits or even enter the play. To hit a multi-bagger in a day or two from a big board listed company…now that takes a particular skill set and a little bit of luck. For those who picked-up on Cereplast Inc. (OTCQB:CERP) over that past few days, the opportunity was there and delivered to those with unwavering nerves. The stock price has been pummeled since the beginning of 2011 when shares of the biobased compostable and sustainable bioplastics maker were trading as high as $6 each. Two years and piles of mounting debt later, shares were threatening to go subpenny for the first time in history.


Brave traders willing to take the risk that the stock price would bounce off a psychological support at the penny mark were handsomely rewarded as the company filed on Tuesday an 8-K with the Security and Exchange Commission that helped calm panicking investors that were unloading shares. The regulatory filing said that Cereplast had inked an agreement with Magna Group, LLC and the holders of $12.5 million of the company’s 7% convertible notes to postpone default remedies on payments that were due on June 1 and December 1 of last year, but not paid. Magna and the other holders agreed to push the payments due date until June 1, 2013.

Cereplast also said that it was “successful in arranging a structured investment from an institutional investor, offering a repayment plan to settle both the past due interest balance as well as the coupon due in June 2013.” The restructuring gives the company relief from creditors until the end of the year.

Shares looked to be flattening – or at least taking a breather from 8 straight days of closing lower than it opened – on Friday after breaching the penny level, going as low at $0.0096 on Thursday. Tuesday’s news, combined with a technical chart that was drastically oversold, got a stock price bounce in motion. Shares surged to close at 2.48 cents on Tuesday, a 148 percent move above one cent.

On Wednesday, Cereplast delivered news that it has generated about $500,000 in revenue over the last six weeks as it strives to restructure its operations and position the company for growth this year. Orders were cited from the United States, India and Europe.

News of making some sales gave shares another mule kick, sending them as high as 4.49 cents on Wednesday, representing a move of a whopping 349 percent off the penny level in just two days. At the same time, volume was exploding, with about 70 million shares trading on Wednesday, a record high level for the company.

Most analysts would still criticize the fundamentals of the company and say that it is doomed to fail and that could easily be arguable given the piles of debt and still limited sales stream. But, for those who love to play the pennies, CERP provided one wild trading ride on Tuesday and Wednesday.

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