Wednesday, August 08, 2012 11:09:49 PM
Compensated promotions are paid by either the company or a 3rd party in either cash, stock or both. Paid promotions aren't necessarily a red flag but typically do lead to dilution (sometimes massive) which never looks good for a company. The best play on these is get in as early as possible, don't get greedy and pay close attention to (no less than) a 60 minute chart for an exit. Millions of dollars can be made in these promotions but they are very dangerous to play for the novice trader.
Non-compensated promotions are more frequent, usually less effective in increasing the PPS but do provide free exposure to a company typically bringing higher liquidity to the stock. As the name suggests, the promoter is not paid in any way but often will buy shares on the open market before the promotion and sell at some point during the run. This is not a reflection on the company as they are not involved in the promotion but are sometimes still blamed for a "pump and dump" by those who got left "holding the bag" after the run. If a non-paid promoter picks up a stock, it usually means that they see a high degree of potential for increase in the PPS and buy shares accordingly.
Additionally, it is required by law (Securities Act of 1933, Section 17(b)) to disclose any type of compensation received for promoting a stock.
You can research current and past promotions here...
http://stockpromoters.com/View-Stock-Promotions-By-Symbol.aspx
As you will note, GDSM has never run a compensated promotion.
There is lots of money to be made by investors in both of these if they know what they are doing.
All IMHO
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