(NEW YORK)–MagneGas (NASDAQ: MNGA), which now goes by name Taronis Technologies, Inc., saw its stock price sell-off following a reverse split, which has many traders wondering what’s next.
Over the past few months MNGA had been a darling among many traders as it traded around the $0.20 to $0.25 range. MNGA was popular with such groups as Robinhood Traders that had a few first time investors in MNGA as their key play, and were unfortunately caught by surprise when company announced its 1:20 reverse split.
The reverse split meant shareholders were giving 1 new share for every 20 shares in MNGA they held at a new split adjusted price.
Nothing really changes in reverse split.
Example: If you held say 10,000 shares of a stock at $0.10 that would be worth $1000. Now if stock did a 1:10 split your holdings in stock would drop to $1000 shares, and price would increase to $1.00, which would still equal $1000. So what’s the big issue then?
Sometimes after these splits companies can issue new shares for such things as acquisitions, or financing, and this can quickly dilute the new share structure, and drop the price sharply, which tends to really damage investors who help the stock prior to the split. In short it’s a bad thing in say 70% of the cases, and this tends to have traders sell first ask questions later.
MNGA situation was no different as their stock dropped 28% from its split adjust price of $4.00 to close at $2.99.
This $2.99 close would equate to around $0.15 pre-split, and for many the pain was to much as many headed for the selling exit.San Diego Deal A Positive
But for investors wondering all is lost with MNGA they should think twice. The Company recently announced that the City of San Diego has elected to use MNGA as its metal cutting fuel of choice, marking the first major city contract for the adoption of our metal cutting fuels. The City of San Diego has historically used acetylene to maintain a wide range of equipment used for waste removal, maintenance and infrastructure support and as of this contract, the City will immediately begin adoption of MagneGas’ cleaner and safer fuel products. In addition, the San Diego Continuing Education Cultural Complex (“ECC”) has elected to begin using MagneGas for the training and recertification of welders in the southern California market.
This is a pretty big deal as it isn’t that easy to score municipal contracts as there usually requires extensive due diligence on any new contracts. If successful in San Diego this contract could spread to other cities with California, and maybe additional states in the West.
How to Trade MNGA Going Forward
But what are the prospects for MNGA going forward now? Should investors still holding the stock cut their losses, or ride out the storm until dust settles.
Ludlow Research, a small cap equity research firm made note to subscribers…
…that there is no doubt risks are high for a stock after a reverse split, but no matter how crazy it sounds maybe sentiment has gotten so negative that there is a trade is to be had at these levels.
They made note that the RSI indicator on MNGA was now trading just above 30, which usually indicates an oversold nature, and could signal possible short covering squeeze in very near future.
The stock was also testing its low from back in September 2018, and with the high volatility nature of stock there could still be a break below that support line, which would then offer a more attractive buying opportunity for potential short term traders.
The company story remains intact with its recent deal in San Diego, and now with a much smaller float in public market, which means this stock could move much faster on any new buyers entering the market.
Sure there remains high risk of possible dilution from any notes being converted, which would be a very bad thing for any stock after a reverse split, but overall if investors had not sold back at $4.00 level it may be time to consider dollar cost average down below $3.00 for possible short-term pop to lower their break even point for a smart exit from trade.
As dust begins to settle post-split Ludlow Research sees attractive entry point between $2.00 and $3.00 range for possible short term covering bounce, with even stronger interest under $2.50 on any panic selling from novice traders.
As of Feb 01, 2019, MNGA now has around 6.9 million shares issued and outstanding after its split
http://wallstreetnewscast.com/investors/ About Taronis Technologies, Inc.
Taronis Technologies, Inc. (MNGA) owns a patented plasma arc technology that enable two end use applications for fuel generation and water decontamination. The Company’s fuel technology enables a wide use of hydrocarbon based waste streams to be readily converted to fossil fuel substitutes. The Company is developing a wide range of end market uses for these fuels, including replacement products for propane, compressed natural gas and liquid natural gas. The Company currently markets a proprietary metal cutting fuel that is highly competitive with acetylene.
The Company distributes its proprietary metal cutting fuel through Independent Distributors in the U.S and through its wholly owned distributors: ESSI, Green Arc Supply, Paris Oxygen, Latex Welding Supplies, Tyler Welders Supply, United Welding Supplies, Trico Welding Supply and Complete Welding of San Diego. The Company operates 17 locations across California, Texas, Louisiana, and Florida.
The Company also owns a patented technology for the decontamination of waste water. This technology is proven to sterilize water, eradicating all pathogens. This technology also eliminates pharmaceutical contaminants such as antibiotics, hormones and other soluble drugs suspended in the contaminated water. Lastly, this process is capable of reducing or eliminating other contaminants, such as harmful metals, as well as nitrogen, phosphorus, and potassium levels that trigger toxic algae blooms. This technology has prospective commercial applications in the agricultural, pharmaceutical, and municipal waste markets. For more information on Taronis, please visit the Company’s website at http://www.TaronisTech.com
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