mistakes I made on EGMI
Reposted/Blog from sg
So as many of you know I bought $EGMI sometime earlier in the year when I saw it dip down below $1.30. I bought it between $1.08 and $1.29, and sold 10% at $1.45. I then watched in horror as the stock dipped to $1.14, I added some, then to $.90, I waited, and to the .80's where I said "okay I'm adding here... " ---
I made so many mistakes in that trade, I don't even know where to begin. My biggest mistake was buying the stock when I knew management was shady from day one. I always said I never trusted the management team, they were incompetent, the pending Poken deal sounded like a joke, etc. The one thing that kept me coming back was the numbers/value, and the hope that management would get their assess kicked and a new team would be formed.
I can't blame @iancassel for me buying the stock. Anyone who blames him is looking for a cop-out for their own loss, rather than owning up to the fact that what we do is risky. We are trading, investing, and collaborating. We need to recognize there's risk in every trade, especially the ones with a shitty management team. Ian was very open and honest with me the entire time, I knew his open market position in the company, and even knew when he took some off the table. He wasn't pulling punches on the management team either. He even supported the stock when it needed support.
First: The tale of the tape and listen to Kunal
Who knew what was about to happen? Well, for one the tape knew. Had I paid more attention to the stupid tape I would have seen the sudden volume bombs near the end. The stock was dropping fast because people were dumping their shares. Obviously someone heard something, and as I understand it one of the ladies on the inside, Anna Houssels, started dumping her shares as low as sub $1. While this lady was dumping I wasn't paying attention. Kunal (kunal00 on twitter) told me to stay away from it, he hated the company in general, but he also didn't trust the "pumper" side of the stock.
Second: Google the insiders
If I knew I was taking a larger position in the company I should have really researched the insiders. Go to Yahoo Finance, look at the insiders, and start to do some Google searches and you'll understand. One of the insiders, Lee Cole, was supposed to be the guy who could save the company. He was the previous CEO and he apparently single handedly created all the business for the company pre the new CEO Kevin Donovan. The problem is Lee Cole has been involved in a number of failed companies, all of them ended up in sub-penny land. Whether it's his fault or not, doesn't matter, his track record isn't exactly solid.
Third: Trust your gut, and always mitigate your risk on a spec stock (don't be a hog!)
The next thing I did wrong, my gut was telling me NOT to add when the stock went under .90. ..but like an idiot I saw people on Twitter buying shares down there, so I decided to double down. I went from a comfortable 50k position to 125k in a matter of two days. My biggest mistake was increasing this position. A position that I had little belief the management knew what they were doing, a position that was a falling knife. I just was completely enamored by the numbers. Now the position was still less than 4% of my daily trading account, but it's still a great deal of money. I know making it back wouldn't be hard.. but no one needs a loss of $125,000 (assuming the stock went to 0).
Fourth: If the numbers are too good to be true, they probably are.
The numbers are actually amazing on this company, assuming they were not fake. When the company got halted by the SEC I could not believe it. I immediately contacted the CEO Kevin Donovan who assured me the company was working on it. Email after email, I received very little back. Come D day when the stock re-launched with NO NEWS I watched as the stock dropped down to .10. I tweeted out that buying EGMI under .15 might be a good gamble (and it was). The stock shot up, and I basically liquidated my entire position at .35 --- but 2 minutes later the stupid company FINALLY launched news saying they are certain the assets won't change. What?! You mean to say you IDIOTS waited for the stock to open, so innocent traders would dump their positions down to .10 and then you'd announce you had the money?
Well that was the final straw for me. The stock went up a little, but now it's back where I sold it. ..and good riddance. As I understand it the only reason the press release was late was because they could NOT find Kevin Donovan to sign the PR. Look at it and you won't see his signature. Want to know where he was? Rumor has it that he was drunk in bed. That's right. The I heard from a reliable source that the CEO of this company let the shareholders lose their shirts while he was drunk in bed. The SEC should have a field day with these guys, and I hope they do.
and the Bitter Conclusion...
Now that's a bunch of shitty circumstances. I took a big loss, roughly 80k --- but considering I thought I lost 125k I say I did pretty good. It hurts to think that I could have bought a 911 Turbo and driven it into a tree, I would have had a much better time than babysitting this bag of paper. A big loss indeed, but again I did do a pretty good job of making it back quickly -- but it did take many large trades, and I also had to lose some of my swing trades to make it happen. It actually took me awhile to understand what I did wrong -- because it's hard to find fault in good numbers, crooks are crooks (assuming they are indeed crooks) - they could just be that stupid.
I don't know.. and while I never like to see anyone lose money, I wish all longs well, I would say there are better ways to repair your trade then to sit in this pool and hope they'll come around --- especially with all of these lawsuits. Either way, never again. I will not invest big positions in speculative stocks unless it meets the criteria above. Tape, Google, Gut, Numbers. TGGN.
Last thing I'd like to say. I feel bad about anyone who followed me blindly into this trade. Although I was clear on the risk, and always made it pretty obvious that I didn't trust the management -- I never wish ill on anyone (not even my haters! - I secretly wish well for them every day).
I am developing a number of strategies that will help make it back. As I said above I already made mine back, even before the stock re-opened. I just hope you learn from my mistakes above!
