After a huge run-up and achieving meme status, Camber Energy (NYSE:CEI) stock has fallen back to earth. The trigger of this CEI stock crash was a damning report released by famed short-seller Kerrisdale Capital.

In the short report, Kerrisdale highlighted several red flags. The company has an incredibly confusing organizational structure. Flaring up these red flags is its failure to file financial statements since September 2020.

Camber Energy has since responded that it aims to comply with its requirements before the deadline of Nov. 19, 2021.

Just the fact the company hasn’t been current with its financial statements makes me incredibly hesitant to invest in CEI stock. However, the Kerrisdale report has even more damning information.

The investment firm reports that the widely reported share count of CEI stock is wrong. This is due to Camber Energy’s highly dilutive class of preferred shares which has gone underreported due in the absence of its financial statements.

Kerrisdale claims that the fully diluted share count is approximately three times the reported number. This would translate to a market capitalization of nearly $900 million as of the writing of the short report. The stock has fallen nearly 65% from its highs since then. Using the current market cap and assuming the “true” number of shares outstanding is 3x reported, CEI stock is currently trading at a market cap of roughly $410.8 million.

Now whether or not this is overvalued depends on your assessment of Camber Energy’s underlying business. But a worrying piece of evidence is the fact that the company’s response was fairly weak.

The released statement did not strongly deny any of the allegations and seemed to side-step a lot of these issues. I would have preferred to have read a statement addressing these issues point by point and offering countervailing evidence. That Camber Energy didn’t do that could possibly mean that there is some truth to these allegations and outright denying them could lead to legal action later on.

Does CEI Stock Have Any Value?

The rest of the Kerrisdale report is a good read and I encourage investors to check it out. For my purposes, though, the valuation issue is the main one. It establishes CEI stock as an extremely high-risk investment. But ultimately that doesn’t tell the full story without understanding the reward portion of the equation. Is there anything that makes CEI stock an interesting investment to take on such risk?

Not my opinion, not really. At its core, Camber Energy is a small oil and gas company. It has a 62% majority stake in Viking Energy (OTCMKTS:VKIN), a group which has oil and gas assets in Texas and Louisiana. Camber Energy has no other significant assets.

Viking Energy had revenues in 2020 of $40.2 million. This revenue however was dwarfed by the firm’s massive $64 million net loss.

The company recently secured the intellectual property for a carbon waste-to-clean energy system. This news was the catalyst for a massive run-up in CEI stock. In my view, this announcement was a huge “nothing-burger.”

Carbon capture systems are nothing new and there are many models being sold by more-established companies. There is serious execution risk here and it remains to be seen if Viking Energy / Camber Energy would be able to make any strides in this market.

Investor Takeaway on CEI Stock

I fully agree with Kerrisdale’s assessment of CEI stock. Even without some of the more sensational allegations, Camber Energy is nothing more than a part-owner of a small OTC oil-and-gas company. I believe CEI stock is not worth the risk.

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On the date of publication, Joseph Nograles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.