Have you lost money investing in Prospect Global Resources PGRX?
Many investors in Prospect Global Resources were stunned to see their investment in the company’s shares drop precipitously after Apollo Group pulled out of the deal to save the company in March 2013.
But what many investors were unaware of was that the company was in desperate financial shape, as revealed in their 10Q filings with the SEC. The company had not obtained the necessary permits to begin mining the Potash from the Holbrook site, while they needed to raise significant amounts of cash to repay a secured lender. An excerpt from the quarterly report for the period ending December 31, 2012:
Our strategy is to increase shareholder value through the exploration and development of the Holbrook Project. The realization of our investment in the Holbrook Project is dependent upon various factors, including but not limited to, our ability to obtain the necessary financing to continue the development of the Holbrook Project and fund our obligations to The Karlsson Group.
Our forecasted cash requirements for the next twelve months include significant expenditures for the further development of the Holbrook Project and approximately $131.0 million that is owed to The Karlsson Group.
These factors indicate the existence of a material uncertainty that could raise substantial doubt about the Company’s ability to continue as a going concern as the Company’s ability to continue is dependent on the Company raising additional debt or equity financing. The Company is currently exploring several options and believes these efforts will result in the Company obtaining the financing required. However, we currently have no commitments for any financing and there can be no assurance that such financing will be obtained or, if obtained, that the financing will be on commercially favorable terms.
We have not yet generated any operating revenue. We anticipate that we will continue to incur significant operating and development costs without realizing any revenues at the Holbrook Project for the foreseeable future. We incurred a net loss of $37.0 million for the nine months ended December 31, 2012 and had a working capital deficit of $122.8 million as of December 31, 2012.
We are in the process of finalizing our major permit applications. During the first quarter of 2013, we plan to submit our application for the Air Quality Control permit to the Arizona Department of Environmental Quality (“ADEQ”) and our Mineral Development Report to the Arizona State Land Department (“ASLD”) to convert certain ASLD exploration permits to mineral leases. During the second quarter of 2013, we plan to submit our application for the Aquifer Protection Permit to the ADEQ.
We are highly focused on completing a definitive feasibility study for the Holbrook Project by the end of 2013. We will need to raise significant capital in order to fund operations and complete the definitive feasibility study.
With these disclosures in the 10Q, an investment in Prospect Global Resources was suitable only for the most speculative of investors, as the company was telling the SEC that it had no revenue, insufficient permits to begin operations, owed $131 million to a secured lender, due in a year, and would have to raise significant amounts of money just to continue operations.
If you were recommended Prospect Global Resources as anything other than a speculative investment, you may have a valid claim against the broker or investment advisor who made the recommendation.
The Law Office of David Liebrader practices exclusively in the field of investment loss recovery. For the past 23 years, we have dedicated our law practice to assisting investors who have been victims of investment fraud via fraudulent and unsuitable investment transactions. During that time we have recovered money for over one thousand individuals, pension plans, trusts and companies. The recoveries we have obtained via judgments, awards and settlements on behalf of our clients exceed $40,000,000.
When investors contact our firm they can expect prompt attention, and a detailed analysis of their issues. Typical claims that we are asked to review involve “unsuitability (where a financial advisor makes investment recommendations that are inconsistent with a customer’s investment objectives), claims for “churning” (where a broker enters into an excessive number of trades for the purpose of generating commissions), claims involving illiquid investments such as private placements (I.e., real estate investment trusts, limited partnerships, equipment leasing and oil and gas drilling programs) as well as claims for violations of state securities laws, which often provide investors remedies like attorney’s fees and interest, if they are successful on the claim.
Since a Supreme Court ruling in the 1980s, most investment related disputes between brokerage firms and their customers have been filed in an arbitration forum hosted by FINRA Dispute Resolution. FINRA, along with the SEC, serves as a securities industry “watchdog” and regulator. Most brokerage firms require their clients to sign binding arbitration agreements, mandating that any disputes between them be arbitrated at FINRA.
Investors pursuing claims at FINRA typically advance claims related to suitability. FINRA rules require that all registered representatives make suitable investment recommendations to their clients. Other claims are based on negligence or breach of fiduciary duty, while another category includes claims based on misrepresentations and fraud. Most claims filed with FINRA are resolved within 15 months, and oftentimes, the cases are resolved via settlement or mediation in under a year.
FINRA’s rules require that all investment recommendations made by licensed financial advisors be suitable in light of a customer’s needs, objectives and risk tolerance. In addition, all registered representatives are required to be properly supervised, with periodic inspections and reviews by qualified supervisors, whose job it is to vigorously investigate suspicions of wrongdoing (red flags).
If you suspect that you have been the victim of investment fraud, or had a financial advisor recommend unsuitable investments to you, call us today for a free, confidential consultation at (702) 380-3131.