Ordinarily, a money-losing company like Cynk Technology Corp. (OTC:CYNK) would languish on the over-the-counter stock market and attract little attention from either investors or the media.
Cynk, though, has managed to attract plenty of attention, along with a market capitalization of $4.5 billion. That's an astonishing feat for a company with no products, no revenue, no website and exactly one employee.
To put this in perspective, the New York Times Co. (NYT), whose roots date back to 1851, sports a market value of $2.1 billion, while restaurant chain Zoe's Kitchen (ZOES), which has 111 locations in 15 states, is valued by the market at $572 million after its recent IPO. No one has a clue how a company that few people had heard of became a stock market juggernaut.
For the nine months ended Sept. 30, 2013, Cynk announced a net loss of $1.5 million, up from a loss of roughly $16,000 in the year-ago period. It reported no assets and total liabilities of $33,688. The company, formerly called Introbuzz, said it has accumulated a total deficit of $1.6 million.
Cynk, which is incorporated in Nevada, also said the company's management has examined the startup's internal disclosure controls and procedures. Their findings? "Based on their evaluation, our chief executive officer and chief financial officer have concluded that, as of November 4, 2013, our disclosure controls and procedures were not effective."
As Bloomberg News noted, Cynk shares were worth 6 cents as recently as May 15. Before the Securities and Exchange Commission ordered its shares halted on Friday, the stock was priced at $13.90. The stock has risen 24,000 percent in the last month alone.
Writing in Seeking Alpha, Paulo Santos of Think Finance speculates that Cynk insiders may trying to jack up the company's price by shutting down the supply of shares available for short-sellers to acquire. Short-sellers make money by borrowing shares in the hopes that they can buy back the stock at a lower price and pocket the difference as profit.
In regulatory filings, Cynk's CEO is identified as a Marlon Luis Sanchez. He is also listed as the company's president, chief financial officer, chief accounting officer, secretary, treasurer and director.
According to a Bloomberg account, Sanchez was recently having his young son screen his calls. He did his job well. The news site noted that "the little boy who answered the phone at Sanchez's home couldn't have been more polite or well drilled in phone manners."
In its latest quarterly earnings, Cynk describes itself as a development-stage social networking company, saying that it plans to "develop a database of professional and other business persons as well as other interested persons in providing and utilizing contacts."
The company also lays out some of the challenges the company expects to face.
"Cynk Technology Corp. plans to introduce a new model for social networks that we believe will require some acceptance," the company said in the filing. "Selling a stranger your record collection via online auction was a stretch for some people to adopt, and Cynk Technology Corp. is likely to face similar challenges from late adopters. Cynk Technology Corp. believes its planned social network may disrupt an inefficient model of meeting people that is currently based on vague notions of social capital by making it clear `I want to meet this person, and I will make it worth your while.'"
According to Cynk, instead of accepting payments, members would collect money for non-profits, though exactly how that is supposed to work isn't spelled out. The company also warns that its business plans may be hurt by what it calls "social network user fatigue," noting that Internet users may be getting tired of being invited to join new services.
"The company has not yet emerged from its development stage, has not established an ongoing source of revenues sufficient to cover its operating cost and requires additional capital to commence its operating plan," Cynk said.
Cynk said it has received money from 30 investors, raising a total of $54,000.