PROMOTERS & TYPES OF STOCK PROMOTION
This question has come up a few times, and here's a breakdown of stock promotions, P&D's and investor awareness. There are various types of Investor Awareness campaigns (IR, IA, Promtion, etc.) and not all of them are bad, or detrimental to the stock or us regular shareholders.
And let me start by saying that I, El Jefe, am in a way a stock promoter. I try to generate investor awareness for a very long, regular period of time in a stock that I believe has the potential for you to make daily gains, and long term gains. I do this to bring liquidity to a stock EVERYDAY, not just one or two days followed by a dump. And because my focus is day trading, and we have a significant group of day traders in this board, our volume and liquidity stay high all the time.
WHY IS THERE STOCK PROMOTION??
In the micro-cap markets, the main problems that exist for a pink sheet public company is liquidity in their stock. You can’t raise money without liquidity, and you can’t do share deals without liquidity and you can’t reduce debt without liquidity. An investor awareness campaign is generally the only way to get the word out.
TYPES OF PROMOTERS
THE EQUITY PROMOTER
This in my opinion is the most dangerous kind of promoter. Also the most prevalent around here. Here you have a situation where promoter "X" contacts company and says "hey, I see your stock is pretty stale, how would you like to raise some cash?? And it won't cost you anything out of pocket.." Company likes this and strikes a deal with promoter. Promoter, in exchange for his services gets "X" shares (we'll use 10M shares for example on a medium float company). The company issues these shares at say 1/2 of bid, and dilutes. Promoter then goes to work and pushes company everywhere under the sun, maybe even paying cash to other promoters. When the pump occurs, they look to immediately dump their 10M (free shares) on the open market "the dump" and there you go.
THE PAID or CASH PROMOTER
The cash promoter will only accept cash from the company. Then the promoter will actually buy the stock as or before they start promoting it. This is because of a couple things, a) They have a reputation…and that is volume…so by putting part of their money in, it assures this. b) The other is that they obviously know that it will be promoted so why not make a little money on it. There is good and then there is bad in this type of promoter…the good is that there really isn’t any shares hitting the market and the stock can move based on the promotion and market perception. The bad in it is the promoters generally get in low…then their “circle” get in a little higher…so what will eventually happen is a steep drop in price. Promoters are not “investors” and will take their profits.
THE SHAREHOLDER PROMOTER
The third type of promoter I call the shareholder/promoter. These are people that have a lot of connections and use their connections to their advantage. For example they research a company and get some info and then buy on the bid for a few days or weeks. Once they are happy with their position they start letting people know they are buying it. From there the price generally makes a small move. Then their extended circles get the notification…price continues to make a small move. Then they give the go on massive promotion, this can cost them money as well. This is message boards, emails, chat rooms, etc. Now remember, where did the the promoter/shareholder get in? Three levels down. BUT in this there is a problem as well…you generally see a slow decline based on each level selling after the excitement has worn off. Seems to take a few weeks.
LAST BUT NOT LEAST - THE "YOU" PROMOTER
This is the best form for a company. This is simply a shareholder that is confident in their own position and what the company is doing. They will promote it on their own excitement. They will send emails to management supporting them. They will be around at shareholders meetings…they are not there to flip. They are shareholders. By continued progress by the company the shareholder will continue to hold on and make that known.
So, in my opinion those are the basic types. Of course greed is all over, and blurs the lines sometimes between one type of pump or another. IR campaigns are everywhere, and are a integral part of the entire financial system Look closely and the big stocks/companies do it all the time. NASDAQ companies often pay upwards of $250-300k to a promotional company for IR services.
