As is often the case with penny stock companies there is a shortage of information available with which to base any real investment decision, making them extremely risky and prone to manipulation by an invisible hand. That being said Healthy Coffee International (OTCPK: HCEI) joins a long list of penny stock companies whose business centers around coffee and has experienced a seemingly unexplainable surge in share price of late.
On Monday HCEI climbed to a 52-week high of 0.41 after digging themselves out of a hole while sitting at 0.15. Of course the high didn’t last long and by the end of the day shares were down to 0.245 and by Wednesday they had sunk to 0.075. They have since rebounded slightly and by late day trading on Friday were trading around the 0.11- 0.13 range but volume continued to dip and is at a fraction of where it was at earlier this week.
The idea behind HCEI is taking their proprietary formulas which combine healthy ingredients like Ginseng, Reishi Mushroom, and other beneficial ingredients with coffee beans to create healthy instant coffee drinks and then use “a simple and unique Internet-driven international business model that allows the average person to own and operate a local, national, or international coffee distribution or coffee house business with very little capital investment or overhead.”
HCEI has said their goal with the direct sales business model is to open 100 countries with a minimum of 50,000 independent distributors in each country within ten years, a goal that would produce five million independent distributors. Now that is a pretty lofty goal for a company that hasn’t distributed a press release since August 2010 or given any kind of update to where they stand financially.
Look, HCEI is a penny stock company trading on the Pink Sheets and investors should already know that they may never have all the information but what is important is gathering the information that is available. If all you have to go by is what HCEI has on their website and a few press releases clustered together in 2010 about a car giveaway then your conclusion concerning the validity of such an operation may not be favorable.
Just understand what HCEI is trying to do, put their product in the hands of five million distributors who will essentially market the specialty drinks on the Internet. That marketing strategy never works well for the individual distributor as they now have millions of people competing against them for sales, the only winner would obviously be Healthy Coffee. While that scenario may make shareholders happy it will almost certainly result in many distributors abandoning their position.
To be a distributor is another odd piece of the puzzle as HCEI opens the position to anybody who is on “a $25 personal volume (PV) Autoship (or minimum 25 PV purchase), or has retail customers who purchase a minimum of $25 per month, or $25 Preferred Customer volume Autoship.” Of course there are various levels of membership that include Gold Distributor, Platinum Distributor, 1-Star Distributor, etc. all of which are bestowed upon individuals meeting a certain volume level.
Selling the specialty drinks should be no problem according to HCEI because they are “well positioned in the market place at the intersection of three mega-billion dollar industries: coffee, wellness and energy drinks, and has quickly moved into international markets by establishing offices in 14 countries, and distributors in 29 other countries.” What constitutes an office is unknown and 29 distributors obviously means 29 individuals who are now trying to market specialty coffee at a time when coffee prices are at a 34-year high, not exactly an easy sell.
Now looking back at the HCEI website it’s hard to ignore their Mission Statement which includes, among other goals, to “build a legacy company that holds integrity as its foundation.” That sounds great but part of integrity in business is being forthcoming about your financial situation and providing greater disclosure upfront about the costs tied to becoming a distributor. With those two areas lacking it’s hard to give them credit for completing that mission.
Completing what can only be described as absurdity is the final piece of their Mission Statement which says HCEI wants to “Give back to the community by helping the orphans and poor children of the world.” It’s hard to tell if they want to sell coffee drinks or win a beauty pageant.
To make matters worse, when you try and read the “success stories” a message appears that tells the reader “coming soon.” For a company that has been around for a few years “coming soon” is a relative term and may only be wishful thinking.
Based on the information available HCEI is a serious red flag for investors and while shares can always hit a boost from a promotion don’t expect strong financial reports to be the cause of any jump for Health Coffee.