Smoky Market Foods, Inc. (fka SMKY)

[Farrago]

The public hopeocracy expressed on this board does not support CEO's hypocracy. If it did then all you guys screaming that SMKY is about to come through with the millions needed to execute the "new" business plan would be supporting SMKY by purchasing preferreds. But that aint happening here is it? Someone correct me if I am wrong.

You're wrong. So I'll correct you. Don't take this as a personal attack, it's not. I'm just trying to provide the clarification you're asking for.

BTW, the preferred offering was cancelled, so this is kind of a moot point, but I'll shine some light for you (and anyone else wondering the same thing).

You've made some assumptions that just don't make sense. Your statement that longs would be purchasing preferreds implies that:

a) all longs here have at least $10k in liquid funds
b) having $10k tied up for an extended period would fit every long's investment strategy
c) the preferred offering offered the best ROI
d) any other assumptions I've failed to list

Ok, so assumption A is clearly not the case. Not that it's anybody's business, but if you went around the "room" of longs and asked who has an extra $10k floating around, everybody knows that not all hands would go up. If I were a betting man, I'd say the vast majority of hands would stay down. Quite frankly, the offering was structured to be attractive to investors that are probably not trading penny stocks and probably not already invested in SMKY.

Assumption B is clearly just as faulty as A. I don't know any folks that trade heavily in penny stocks that would gladly tie up $10k for a minimum of 2 years. Feel free to take a poll of the longs, or even not the longs. I'm guessing you had no idea what the terms of the offering were, because I'm quite certain you don't think that believing a company will succeed is enough to make penny stock traders tie up funds for 2 years.

Assumption C is perhaps a tangent of B, but it's different enough to warrant its own explanation. An ROI of 10x+ is great, but it has to be tempered with a time period. When the offering was first opened, the PPS was hovering around .05. I think that most longs that truly thinks that Eddie is going to secure millions in financing believe that the PPS is going to go over .50, probably way over .50, and probably much, much faster than 2 years. So, I'm just throwing this out as a theoretical number, I'm not saying I believe this, but let's say that I believe that SMKY will go to between $1-1.50 within a year of receiving financing. It's very simple, even on the low end that would double the ROI of the preferred, and in half the time, allowing an investor to move profits into other areas. If we extend the scenario further (and conservatively) say that an investor found another stock with good movement and ONLY made a 50% ROI over the course of the 2nd year on proceeds from selling SMKY stock at $1, the ROI would 3x that of the preferred, without the risk of illiquid funds. And let's be honest, the potential to find other stocks that bring a 2-3x return or higher in a year is almost commonplace.

So, tell me, why would a long invest $10k in a preferred offering?

I think it makes perfect sense that longs weren't rushing to sell their stock to buy preferred shares, or allocating a lot of liquid funds to do so. The terms of the preferred offering reduced a lot of the risk for investors that would not normally invest in penny stocks, that don't watch the market all the time. Investors that look for high-yield investment opportunities that don't require a lot of time input.