EVRM - Is It Too Late To Hop On The Train?

One of the more difficult decisions when trading penny stocks is knowing when a stock is starting to run out of steam, or when a stock that has rallied is still poised to post even more gains.

Momentum can carry a stock significantly higher, but when does that momentum stop.

EVRM has posted a memorable rally from sub $.01 and is sitting right near recent resistance.  The question is, do you chase it here?  Wait for a drop back to the $.04's?  Or Stay Away?

This is a difficult call.  EVRM's last press release is not a favorable one as their share count is ready to push above the billion mark.  The math is not pretty for a $.05 / $.06 stock. (press release pasted below).

The right move here would be to watch the action, volume, and sell/buy ratio.  If $.06 gets broken with any real volume that level would serve as support for a push through $.08.

Let's see what EVRM does these next few days.




The Evermedia Group Provides Guidance on Upcoming Share Structure
NEW YORK, NY, Sep 15, 2009 (MARKETWIRE via COMTEX) -- Recently The Evermedia Group, Inc. (PINKSHEETS: EVRM) acquired a majority position in STS Evermedia Corporation (SEVM), holding company of defense contractor System Technology Solutions, Inc. (STS). As a result of this acquisition, the authorized capital stock of the company will increase from 790 million to 1.28 billion shares. The increase will reflect the issuance of new Class B non-voting and non-trading shares. The total number of outstanding shares will increase to approximately 1.131 billion shares, of which the entire increased amount will be used to finance the recent acquisition. The majority of the stock used will come from Class B shares affecting the Class A shares by an increase of approximately 124 million shares. As no third party investors, brokers or commissions were involved in the transaction, all of the increase in outstanding shares will be given to officers, directors and employees only, all in the form of restricted stock. Furthermore, the percentage increase also reflects the minimum federal requirements necessary for The Evermedia Group and its subsidiaries to maintain the Service Disabled Veteran Owned Small Business (SDVOSB) status. Lastly, the number of shares in the float will not be affected by this transaction. CEO of The Evermedia Group Jonathan Sym commented that "this acquisition is very important to the growth of our company. The STS transaction will allow us to consolidate financials and to generate revenues for the first time in our company's developmental history as well as to align ourselves with several top 100 federal contractors to integrate our biometric identity applications. Now that all of our current and future operating companies will be designated as SDVOSB, this will give us a valuable and distinct advantage when bidding for government contracts against some of our larger competitors." He further stated that "the total cost of this acquisition is about $15 million in stock and cash. What we are buying is an asset that is worth about $80-$100 million, based on STS' current and pro forma revenues, earnings growth rates, relative P/E and its ability to generate government contracts in the next three years. This is an incredible opportunity for us to acquire an asset for a great price. Furthermore, almost 75% of this acquisition was done with newly created Class B shares which do not carry any immediate market liquidity. We did this to assure our shareholders that the principals in our company are in it for long term value. These shares have very limited selling ability but does retain similar economic value to our Class A shares in the event of a merger or acquisition by another entity."