Usually, penny stocks see volatility due to things like news or industry events. On Friday, REMSleep Holdings (RMSL Stock Report) was one of the top penny stocks to watch after a filing was published. What’s also interesting is that this company filed a document showing that it’s trying to raise funds.
I say this is interesting because many times when penny stocks report news about raising funds, investors can be hesitant. But for REMSleep, the company filed what’s called a 1-A. This is part of the SEC’s “Regulation A Offering Statement” and is used by public companies to raise funds according to certain terms.
Essentially, it allows for particular exemptions to companies from registration requirements. It also allows companies to more or less crowdfund shares and sell them to investors.
More On SEC Form 1-A
Also known as “Regulation A” or “Reg A,” this is advantageous for companies not looking to go through the stringent process of other capital-raising options. But investors should understand that the advantages for a company could be potential risks for the retail traders; let’s explain.
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Reg A provides exemptions for companies. Those exemptions include financial statements without audit obligations. In addition, there is no requirement to give Exchange Act reports until the company has amassed more than 500 shareholders and has $10 million in assets.
Now that you know this, let’s look at what REMSleep posted on October 4:
The company appears to be trying to raise $3 million. It’s offering shares to investors at a fixed price of $0.06 per share. There’s also a minimum purchase of at least 100,000 shares. The stand-out here is that RMSL stock trades below $0.03. Even after trading over 11 million shares on October 4, the stock is no closer to the capital raise price than it was in September. However, some see this as a positive. A penny stock raising money at a 100% premium?
Penny Stocks To Watch: Digging A Little Deeper On RMSL Stock
If you take a look at the share structure, there are a whopping 1 billion shares authorized. There’s also under 70 million outstanding as of September 6th‘s figures. The company has a market cap of less than $1million with that math. Now it’s working to raise $3 million at a valuation much higher than it is currently valued.
That’s just based on the price of the offering alone. In addition, the company has announced only a few pieces of news over the last quarter. This includes announcing moving forward with “product production”. Also, it’s “preparing to introduce” its product to the market. In September, the company actually reported it’s in early negotiations with “potential distributors” to bring its product to market.
It also reiterated the fact that it “received Deltawave production and is preparing to introduce the new Deltawave CPAP interface to market;” basically a recap of the previous announcements. The OTCMarkets website shows RMSL stock also has a “Shell Risk.” That site explains RMSL “displays characteristics common to Shell Companies.”
Is This A Penny Stock To Watch Or Avoid?
The answer to that is completely up to you. There is minimal news about this company. It filed for a Reg A offering, and is offering those shares at a much higher valuation than the stock trades at. Furthermore, a look at the latest 10-Q (quarterly report) shows there is still over $300,000 in convertible notes left; all with 10-12% interest.
On Friday, RMSL stock traded its highest share volume day on record. Previous to this, RMSL did have a previous jump in May but came crashing down shortly after. Given the information above, all of this should be taken into account if RMSL is on the list of penny stocks in October.
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