INteresting article on how Geoinvesting works....
Did Geoinvesting Commit Securities Fraud and Use Their Own Message Board Followers as Pawns? 9 comments
Oct 10, 2011 10:10 AM | about stocks: VALV, DEER, SCEI, SVM
Admittedly I have traded long and short in this market and have seen a lot of opportunity in both directions with good analysis by some and really poor analysis by others. With this being said I received an email that I thought was a bit off of color and something I was a bit frustrated to hear about. The screen shot I received was from a message boards that Geoinvesting runs on their website www.geoinvesting.com. This is the “research” firm that also charges individuals to buy advanced “research” reports prior to being released in the form of monthly subscription fees, which results in such individual front-running the stocks mentioned. Why I was appalled by this particular screen shot is that implies that Geoinvesting would employed a massive scheme to make a quick buck for themselves at even the expense of their own subscribers.
We will breakdown the implications in the screen shot below to be very clear on what is being alleged by what we believe is a paid subscriber to Geoinvesting.
It has been noted for some time that Geoinvesting has put together reports on companies in an attempt to drive down the prices of securities based on making an array of allegations that may or may not be true. The intent of these reports is to move the stock price, which one would argue is a clear-as-day 10b-5 violation according to securities laws. With that said, Geoinvesting takes this approach a bit further by using such reports to attract investors to their site so they can charge a monthly fee to access such reports and profit from receiving these stock tips before the reports are released. This has all been covered in the past and Geoinvesting has also been served with lawsuits by two issuers that believe they have had their securities manipulated by Geoinvesting and others. What has not been covered prior is that the subscribers themselves might just be the pawns that Geoinvesting uses to generate the most profit for themselves, and we are not referring to the monthly subscription fee they are required to pay.
From conversations we have had, and press releases from the Companies that have served Geoinvesting with lawsuits, some companies have alleged that Geoinvesting uses a tactic that if a company does not employ Geoinvesting for their due diligence services (we are unsure of the quality of such services), then Geoinvesting turns on the company and instead writes “a negative report” on such companies.
Nevertheless, what is below is even more shocking in our opinion than any other allegations made against Geoinvesting. Recently Geoinvesting has aggressively touted the stock of Shengkai Innovations, Inc. (VALV) and claimed they performed “extensive” on the ground due diligence and aggressively stated that the company is significantly undervalued in the market. The user below is stating that subscribers who pay the subscription fee to receive such early knowledge of reports did not know that immediately prior to issuing the VALV report, they claim that Geoinvesting and their colleagues might have taken a position in the stock and used such report to not only profit from the upward movement in the stock price as a result of such report but also to cover their position they took prior to releasing it to their members – which has been defined by as a classic “Pump and Dump”. We cannot confirm the accuracy of such statements ourselves, but from the tone of the paid subscriber and the stock price movement since such action it would be hard to argue.
Given the recent events that have transpired after the “glowing” report by Geoinvesting (Company issued a statement saying their business is deteriorating rapidly as well as dropped their very prominent auditor for a no name auditor) we ask ourselves:
- Did Geoinvesting rush to publish their “glowing” report, knowing that their on the ground due diligence actually uncovered these substantially negative developments within the company (and such negative developments subsequently came into light shortly after Geoinvesting’s bullish report) so that they could cover their long position at a substantial profit prior to the news being released?
- Or, was this just a classic pump and dump using message boards and “research reports” to manipulate a stock upward leaving their premium members paying subscription fees as the bag holders?
Themes: China Stocks: VALV, DEER, SCEI, SVM
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