Great Panther Silver (GPL): Perfectly Priced To Cave In?

by Sonya Colberg, Senior Editor - 5/2/2016 11:03:54 AM

Great Panther Silver (NYSE: GPL) stands at the brink of a teeth-chattering decline.

Over the course of the past year and a half, stock in the Canadian silver mining company settled in below $1 per share, sometimes falling to 30 cents.

Then shares suddenly blew up. Did this happen because the company hit a rich vein of silver?

Not at all. Rather than Panther suddenly hitting on fortune and reversing shareholders' negative return on equity, the stock has been shored up by ambitious stock promoters. Now Great Panther appears perfectly priced to drop.

Here are the top six reasons TheStreetSweeper is shouting, "Look out below!"

*1. Why Great Panther's Stock Is Up: Jonathan Lebed Special

After seven months of trading between ~40 cents and ~$1 per share, Panther stock suddenly blew up in late April:

(Source: Nasdaq)

  What happened? Well, Panther can primarily thank a well-known stock promoter.

Indeed, last Thursday, on April 28, 2016, National Inflation Association sent out a stock promotion to thousands of email recipients. The hype began like this:

(Source: National Inflation Association)

Despite the name of the sender, this email and others like it have nothing to do with the organization's purported mission of fighting inflation. NIA is not some quasi-governmental agency sworn to help people but instead is all about enriching the NIA.

Jonathan Lebed is the main man standing behind the NIA's flimsy curtain of respectability. Mr. Lebed attracted national attention in 2001 when the Securities and Exchange Commission accused the then-teenager of manipulating stock in a pump-and-dump scheme. Without admitting any wrongdoing, he settled for $285,000.

Mr. Lebed commented:

(Source: New York Times )

Mr. Lebed has been a key figure in stories by TheStreetSweeper and publications such as The New York Times, which wrote of Mr. Lebed's stock trading activities:

"This type of stock fraud is hardly victimless. When a stock price rose from $1.38 to $4.69 on the strength of his false recommendations, then fell to $1.88 after his manipulation stopped, there were winners and losers."

The recent NIA/Johnathan Lebed promotion on Panther is merely the latest in a long string of hype that has inflated the stock.

Mr. Lebed has been promoting Panther periodically since 2014. Back in August 2014, Lebed.biz emailed a promotion to thousands mentioning Panther under its Toronto Stock Exchange trading symbol of GPR. The hype said in part:

There's a huge fundamental problem with promoted stocks, arguably most especially those promoted by Mr. Lebed.

Such stock promotions themselves push up the share price. So the stock price increase typically is not a reflection of any good business practices or even good luck experienced by the company.

That means the share price will typically drop heavily. Because there's nothing but fluff supporting the price.

*2. Kiss Of Death: Rodman & Renshaw

Panther investors need to understand two unfortunate, crucial actions by investor Rodman & Renshaw.

First, Rodman & Renshaw -  a key institution investigated during the Chinese stock fraud issues of 2010 to 2013 - raised its target price for Panther from $1.10 per share to $1.50 on April 14.

Panther stock rose.

Next, on April 20 - six days later - the firm inked a deal with Panther for a $10 million at-the-market (ATM) facility.

By that time, the stock had jumped 33 percent from the day of the price target upgrade to $1.48 on the day Panther and Rodman & Renshaw signed the deal.

(Source: Yahoo Finance)

Indeed, just since January 2015, under the name of Rodman & Renshaw or H.C. Wainwright, (which  acquired Rodman & Renshaw in 2013) more than 20 positive reports have been issued on Panther. Most repeatedly reiterated their "buy" opinions. 

TheStreetSweeper has previously written about concerns with Rodman & Renshaw deals. Experience shows Rodman & Renshaw's involvement is too often the kiss of death.

That kiss often sends a small company's stock rising, followed by a dramatic fall, as earlier investors holding cheap shares sell and run off.

Also, note that the stock now trades more than 50 cents higher than Rodman & Renshaw's price target of $1.50 ... just one more indication the stock is severely overpriced.

*3. Low Institutional Interest

Solid companies with good prospects will attract big banks that have the motivation and means to research companies before actually investing. So average investors usually find some measure of comfort in strong institutional ownership of a stock.

But, as the charts below show, institutions make up an extremely tiny portion of Panther ownership.

(Source: Nasdaq)

And, unfortunately, there are nearly twice as many decreased institutional positions as increased positions in Panther.

*4. No Reserves

Great Panther focuses on mining precious metals from two mining operations in Mexico.

But in Sedar filings for the Toronto Stock Exchange, where Panther trades under the symbol GPR, the company's prospectus supplement updated April 20, 2016, includes discouraging notes on operations, here. These notes help explain the company's ongoing net losses which were $-9.3 million on $73 million in revenue in 2015, and point to Panther's limitations as a miner:

"The Company did not undertake any active exploration programs on the above noted exploration properties in 2015 and does not have any planned exploration of these properties in the near term.

"The Company undertook significant exploration and evaluation work on Coricancha in 2015 which continues in the current year. The Company continues to evaluate additional mining opportunities in the Americas..."

Panther filings also state:

"Only Mineral Resources have been determined for certain of the Company’s properties, and no estimate of reserves on any property has been completed."

Perhaps most astoundingly, Panther filings reveal that it plans to begin mining on these properties ... despite having no studies to show whether any mining would be economically wise:

"No Reserves
"There are no current estimates of Mineral Reserves for any of the Company’s mines or projects. The Company made decisions to enter into production at the Topia Mine, the Guanajuato Mine and the San Ignacio Mine without having completed final feasibility studies."

It is fool-hardy to risk millions to attempt mining without performing extensive feasibility studies so they will have a good idea of the extent of reserves in the ground. And while Panther has cut some costs on its San Ignacio mine, it's still absolutely unclear whether it's feasible to expand the mine and keep expenses in check.

*5. Bad News Missed By The Market: Panther Drops Planned Project

TheStreetSweeper believes the market may have missed an important recent negative event. About Feb. 26, the company opted out of an agreement to proceed with a key project, the Guadalupe de los Reves:

VANCOUVER, Feb. 26, 2016

TSX: GPR
NYSE MKT: GPL

VANCOUVER, Feb. 26, 2016 /PRNewswire/ - GREAT PANTHER SILVER LIMITED (TSX:
GPR) (NYSE MKT: GPL) ("Great Panther", the "Company") announces that it has
notified Vista Gold Corp. ("Vista") that it is terminating the option
agreement on the Guadalupe de los Reyes ("GDLR") Project in Sinaloa, Mexico.  

"This was a difficult decision," stated Robert Archer, President & CEO. 
"However, our 2015 exploration program did not yield the results we had
anticipated and, after an extensive review, we concluded that the project does
not meet the criteria for our current growth strategy.  Vista has been a
terrific partner and we wish them all the best in advancing the GDLR Project
to its full potential."

That mistake resulted in a $3 million write-down for Panther.

That mistake also suggests both a weakness in Panther's judgment and points to the fool-hardiness of proceeding with projects without first completing those crucial feasibility studies. They needed to know ahead of time whether there was enough silver at Guadalupe (or any other pending project) and whether it would be too expensive to dig up.

*6. Silver Poised To Drop?

Finally, Panther stock has likely also been up due to higher silver prices. Now the silver rally appears to be a good indicator that it's time for Panther stock to drop.

Silver closed Friday at $17.80 on the FXCM or foreign exchange market.

The good news is that price exceeds the May 2015 high of almost $18. The bad news is ... that price exceeds the May 2015 high.

The chart below indicates the bad news; silver could once again shrink back from that psychological roadblock of $18 (indicated by the purple dot).

(Source: DailyFX)

 The top yellow highlighted portion in May 2015 indicates what happened last time silver prices approached $18. 

On May 18, 2015, silver reached $17.75 before closing for the day at $17.69. The next day, silver closed at $17.09.

And the drop continued. About three weeks after that initial rally - on June 8 - silver closed two bucks lower. Silver fell later to around $10 or $11, where it remained virtually all winter.

So the slightest pull-back on silver should severely impact Panther. In fact, in early trading this morning on May 2, 2016, silver prices are retreating somewhat ... and so is Panther.

*Conclusion:

Great Panther Silver stock is seriously risky and overvalued. So investors who like silver would be better off buying silver rather than Panther stock, which is about 260 percent overvalued.

We expect Panther stock will cave in very soon, dropping the stock to a more reasonable $0.60 per share.

* Important Disclosure: The owners of TheStreetSweeper hold a short position in GPL and stand to profit on any future declines in the stock price.

* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to scolberg@thestreetsweeper.org.

 

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