Scio Diamond Technology Corp (OTCMKTS:SCIO)
Scio Diamond Technology Corp (OTCMKTS:SCIO) grows diamonds – literally. The company uses a proprietary chemical vapor deposition process to grow diamonds in weeks rather than over billions of years. The diamonds are of varying qualities. Some are of sufficient quality to be used in fine jewelry, others are used for industrial purposes. However most are rated Type IIa which means they have virtually no impurities and, in nature, account for less than 2% of all mined diamonds. So why did SCIO shares shed over 30% of their value on Friday on volumes around nine times their average?
While Scio Diamond Technology Corp (OTCMKTS:SCIO) may have developed the modern day equivalent of the Golden Goose, the company has not been without some embarrassing moments. A few years ago there was a visible and protected proxy battle over the company’s board of directors, and then at the end of March 2017 the company learned its former chairman had been indicted in federal fraud charges. The indictment alleges that Edward Adams, former Chairman of the company’s Board of Directors, operated a fraudulent scheme to embezzle millions of dollars of investor funds. Scio Diamond Technology Corp (OTCMKTS:SCIO) is cooperating with federal officials. These allegations were, according to experts, responsible for the downward spiral of SCIO shares over the past quarter. According to reports, the accused fraudster has been liquidating his shares at a pace that could account for the market pressure on SCIO prices. SCIO shares have lost over 52% over the past three months while the broader S&P 500 market has gained around 2%.
Despite the ability of the company to produce diamonds using a patented technology, Scio Diamond Technology Corp (OTCMKTS:SCIO) has not yet turned an annual profit. However, while operating losses have been normal for Scio Diamond Technology Corp (OTCMKTS:SCIO), the loss amount has been smaller each year. That shrinking loss has been reflected in the net income applicable to common shareholders. In 2013 the loss was (-$7.2) million. Each succeeding year the loss shrank and in 2016 the loss was (-$3.6) million. Good news was, however, found in the last 2016 quarterly report. The September 30, 2016 quarterly report showed a gross loss of $314,000 but the December 31, 2016 quarterly report posted a gross profit of $162,000.
Scio Diamond Technology Corp (OTCMKTS:SCIO) is based in Greenville, SC. No doubt the company has had a difficult time executing their business plans that can be, in part, based upon events beyond their control. The market for diamonds is, to say the least, enormous and they appear to have a competitive advantage in the supply of diamonds. Interested investors should stay close to developments as this stock could move quickly on good news.
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
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About the author: James Marion is a University of Houston student studying Business with a concentration in Finance. James has interned with several investment professionals and hopes to pursue a career as a professional stock analyst after graduation.