Based on trading since 2008, big gamblers have finally left the table, one by one. It took them 5 years to figure this one out. Five long years!!
In five years, this company has basically done nothing significant, but instead, lost so much money from big investors. Looks to me, they finally had enough. Look, in the past five years, the oil price has made many real companies rich, and made many big investors rich. But not ROYL - it has done nothing but losing money.
The management is the most inapt I've seen. They're only good at hyping. They paid the highest bid for the block of land in Alaska, without any real basis of ever developing the land. They tried to raise fund by announcing a $5 investment unit. But after one year of trying, nobody wanted to bite on the bail from those people again.
Those people running this little outfit are really losers - they're as close to scam as one could possibly be.
Now, the bank load is in trouble. Chapter 11 filing soon?
"At September 30, 2012, we were not in compliance with the current ratio financial covenant, the tangible net worth financial covenant and the interest coverage ratio of our loan agreement with the bank, but we have obtained a waiver from the terms of those covenants."
"At September 30, 2012, Royale Energy had current assets totaling $4,807,690 and current liabilities totaling $12,104,904, a $7,297,214 working capital deficit. We had cash and cash equivalents at September 30, 2012, of $1,569,069 compared to $2,946,131 at December 31, 2011."
So, basically, they have been able to raise any more debt from investors, after filed a debt offer last year of $4.5 mln, including potentially warrants. Sadly, every time when the underwriter tried to jack up the stock, big sellers jumped onto the rallies, and the stock was crushed every time. The end result is that they have not been able to raise any fund from the Wall Street.
These people have lost credibility completely - in nine months of time in 2012, the working capital deficits were run up to $7.3 mln. And Q4 is coming up and big shareholders are getting the hell out of the stock before a potential default announcement, or a substantial dilutive stock offer at probably $1.25 - 1.5/share.
They tried to sell a convertible debt offer, but nobody was interested. The prospectus was filed at the end of Oct 2012. It's been over four months now, but nobody was interested.
That's the reason the stock is crashing down again. And this time is a very different feel from the past.
The most important thing to watch for this little company in trouble financially will be if and where the company would be able to raise fund with investors. They've tried for over a year, after winning the bid for the block in Alaska, but without success in raising any money from outside investors.
The thinking is now on the wall - the CEO gambled by sending in an obscenely high bid for the block in Alaska, where they have no previous experience. This little company bid out all of the other giant companies for that piece of land! The hope was that some investors would be fooled by the winning bid. However, based on its track record, the company really doesn't what they've been doing. As a result, the stock chasers, the big ones, have been crushed into pieces in the past 5 years.
In Q4, they're expected to lose over $1 mln, at least. Accordingly, the working capital deficit will grow even higher. They have failed to raise any fund from outside in over a year.
So, the clock is ticking away. Will the bank in Texas pull the plug, and stop providing waiver? Remember, the waivers can only run so long. All waivers come to an end, badly.