Shares of Houston American Energy Corp. (HUSA) were hammered down 28% on strong volume Wednesday, which the company attributed to an internet posting questioning the valuation of its holdings and inferring that it is "set up for a massive collapse".
On Tuesday, the stock touched a new intraday high of $20.36 before closing the day's trade at $20.35. Tuesday's closing price of $20.35 represented a gain of 1140% from the intraday low of $1.64 set by the stock on April 8, 2009.
The article titled "Houston American Energy Corp. - Set Up for Collapse", which was published on Seeking Alpha, warns investors that "HUSA has a history of a hyped stock and that there is more than 65% downside from current levels".
The article claims that HUSA management has a poor track record of estimating or possibly inflating proven reserves. The article also alleges that prior indiscretions of HUSA's founder and CEO, John Terwilliger, are highly concerning.
Commenting on the allegations, John Terwilliger, President and Chairman of Houston American said that the internet postings mischaracterize the company, the management team and the very nature of their operations.
Houston American clarified it has no debt and operate with a lean overhead structure. The company also said that it is not a party to any litigation, nor is it aware of any threatened litigation, as claimed by the internet posting.
Responding to the charges raised by the author of the internet posting over the receipt of royalty payments by Terwilliger and Director Orrie Tawes, the company clarified that "those royalties were established early in the company's life when no compensation was paid to officers and directors and the royalties that have been paid have been consistently disclosed".
The company's oil and gas exploration and production activities are focused on properties in the U.S. onshore Gulf Coast Region, principally Texas and Louisiana, and on the development of concessions in the South American country of Colombia.
Refuting allegations of overhype surrounding its Colombian investments, Houston American noted it stands behind the performance and track record of its partners in Colombia. Houston American along with its consortium partners sold their initial prospect in Colombia for roughly $1 billion and has an established record of finding and developing reserves in Colombia, the company said.
HUSA closed Wednesday's trading at $14.51, down 28.70% on a volume of 4.52 million shares. However, in after-hours, the stock gained 7.86% to $15.65.
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