PUMPs & dumpS
Red Flagging DANGERS In The Penny Market
June 13, 2011
A subscriber recently asked as if a stock's removal from our Continuing Alerts heading means that we no longer believe that the stock is a Pump & Dump or if we believe we were wrong. It does not mean that at all. It just means that we believe that the Pumping & Dumping is not in play at the moment. As soon as it is back in play, we will add it back to the alert. It bears repeating that the only reason a microcap stock is ever touted is in order to relieve you of your money. Insiders are selling and they need customers. When there is no current P & D, it only means that the insider selling has subsided, FOR NOW!
Another bogus claim invoked by insiders is that touters were hired in order to raise the awareness of the stock and increase the share price for the current investors. Horse feathers! We challenge anyone to find a microcap stock whose price increase following a tout was ever maintained over a significant period of time.
Switching gears, two common claims made by microcaps in order to appease shareholders and con new investors always make us laugh. One is the claim of a share buyback. These announced intentions are very common but rarely executed. They are always announced with caveats and disclaimers using words like, "may", "at the discretion of" and "from time to time". Rarely has more than a couple of thousand dollars worth of stock ever been bought back under one of these promotions.
The other announcement that is always good for a laugh is the company's intent to "work towards full reporting status". A company can become fully reporting at the drop of a hat. All they have to do is report. They don't need SEC approval to report, just report. What they are trying to make you believe, without actually saying it, is that they are intending to move from the Pink Sheet market to the Bulletin Board market. This process is requires audit financials, extremely pricey, paper intensive and so prohibitive that few pink sheets ever make the transition. But financials do not have to be audited for a pink sheet as long as the accounting is identified as unaudited. So the next time your favorite issuer makes this claim, stay on it. Pester the company and see why they are not reporting yet.
We received a boatload of favorable responses on our advisory on FXIT over the last couple of days, much of it expressing disgust that the SEC and FINRA allow these types of schemers to repeat their cons. We agree that more investigation into the background of those running public companies is required. Obviously if we are able to uncover the unscrupulous activities of insiders, the government agencies should be able to do at least as well us we are.
We've received several reports over the weekend that an aggressive Pump & Dump campaign has begun on Eagleford Energy (EFRDF). Although we have not seen the evidence, the campaign reportedly includes emails to subscribers of tout sheets as well as a 14 page color brochure that has been mailed out to members of certain lists of investors. Many of our subscribers have not seen this type of promotion technique before and have asked us what to make of it. Coincidentally, we talked about just such a mail campaign in Thursday's advisory. That campaign was conducted by the insiders of FXIT when they ran YASH (now BOPT). We also referred to other brochures developed by SPNG, whose insiders are now facing criminal charges and litigation brought by the SEC, and KYUS. These types of promotions always represent the most unscrupulous of scams and the identified sponsor of the brochure is either fabricated or an out and out lie. The EFRDF brochure reportedly claims that $526,000 was spent on that promotion campaign. We call BS. Furthermore, when Canadian based natural resource companies list on US Over-the-Counter markets, it is almost always because the company insiders cannot pass muster with the more regulated Canadian securities commissions. We see a lot of red flags with this one and would stay away. We would request anybody who has received this brochure to scan and email it to us so we may inspect it.
In the meantime, kudos go out to the Hettinger family who are putting on a clinic on the proper way to conduct a Pump & Dump through HPGS. Not in a hurry to extract their ill-gotten funds from the public, they are conducting a spread out and even promotion amongst the various touters over the course of several weeks and maintaining a relatively tight range for their stock, while avoiding the wild swings that set investors off into a panic. They are not making the mistake of pounding all of their stock at once and we believe that they are, in fact, supporting the share price at the bottom of the range while selling into the higher end. This is in difference to the insiders of companies like AVVC, CUBV and FXIT who were going to cash in on their shot no matter what price they were getting for their stock. Of course the share price of HPGS will still eventually fall out of bed once the Hettinger's run out of stock for sale and no longer have a reason to support the range.
Alert:
We have recived several reports of a mailed brochure campaign on EFRDF.
We classify this as a pump and dump.
Alert:
At least three paid touts are sending emails promoting HPGS.
We classify this as a pump and dump.
Alert:
At least one paid tout is sending emails promoting AAST.
We classify this as a pump and dump.
Alert:
At least one paid tout is sending emails promoting NPWZ.
We classify this as a pump and dump.
Continuing Alerts:
MFTH, SLLN, MXMI, FOGC, ULBI, SKGP, FTEC, EAPH, AAST, PWRV, HRTE, PLLX, COBI, RMGX, AMPW, TMSH, TBBC
Be careful out there!
