fyi: Many Pinksheets are created to be destroyed:
Maybe it's just disilusionment setting in, given recent events, but with each passing day I become more and more convinced that many pinksheet companies are created with the singular intention of being destroyed at a later, pre-determined date, by the very individuals and groups involved in their creation. This is a reality most penny players do not even take into consideration, but which greatly diminishes their odds of profiting on most penny plays if they hold for any length of time.
It is my belief that in a number of recent cases, company insiders and founders are actively participating in the shorting of their own company's stock, along with the PIPE financing hedge funds who helped them create the vehicle.
These companies are merely an instrument to make quick profits through the sale of worthless shares. There is never any intention of establishing a business that will last, or investing the raised funds back into the company for the future benefit of shareholders.
In spirit, this is similar to people who buy a house using interest-only adjustable rate mortgages during a high appreciation environment. Most intelligent people who would do such a thing, have no intention of remaining in the property for anything more than a year or two. That is not the strategy for a long term investment.
The same way that the LBO mania was largely a vehicle for creating revenues from fees, PIPE financed pinks are a vehicle for making millions by printing worthless paper. The people who created the company, and who are initially involved in the pump, then also make money by shorting the stock into oblivion. In such a case, an SEC halt is actually welcomed by the shorters, since it provides them with a convenient exit for the 'story', and they need never cover their short positions. The poor gullible sheep couldn't begin to conceive of this kind of trading strategy, and get hit coming and going. But nearly every classic grift similarly ends with a raid by the police, staged or otherwise.
The more complex the "story", the more "drama", the more certain I now am of manipulative and fraudulent intentions. Be wary of any stock that needs to be sold with a complicated storyline, featuring many mysterious participants in a highly charged, emotional environment. Taking a page from a classic grifter's ploy, these individuals may even appear to be at odds, and get into vicious fights to distract investor attention from other matters. An incorporation in Nevada, given the reasons discussed in the previous post, raises the odds of the stock being a money laundering scam.
The scope of this goes so contrary to the way most people think, I'm not surprised that otherwise stockmarket savvy and intelligent people fall for the trap.
I now wonder how many pinksheet CEOs are actively shorting their own stock? Quite a few, I suspect. That's the real kick in the pants.
I also don't expect anything to change anytime soon. Money creates it's own rules. It's up to investors to be fully aware of the entire range of possibilities, and take evasive action to protect their capital. "Caveat Emptor" applies more than ever to this end of the market