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SQUEEKBOX (Famous SI PIG) sez the SEC be halting this one soon!!!
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April 28, 1999
ZiaSun (OTC BB: ZSUN)
4/28/99 close $22.13
Sponsored by WallStreet Guru
Sunburn
ZiaSun says it will be Asia's gateway to the online world, but could
it simply be headed into the sunset?
By Lynn N. Duke, staff writer
ZiaSun Technologies Inc. (OTC BB: ZSUN) seemingly came out of nowhere
in the past month, trading more than 2.3 million shares in four days
while its share price more than tripled.
What's behind this upstart? Not much, so far as we can tell besides a
slew of press releases and some pretty outrageous hype.
ZiaSun claims it will be Asia's portal to the Internet, and promises
to offer everything from online auctions to free email. But the
recent meteoric rise of its stock price and volume hit several notes
on the Stinky Stock scale.
We got a little nervous right off the bat when it turned out the
company's "world headquarters" shared a phone number with a
Vancouver, B.C.-based stock promoter, Veritas Group. Several people
at Veritas, which is handling the company's investor relations, were
unable to answer some pretty basic questions about the company's
stock structure or its business plan.
But here are the bare bones: ZiaSun was acquired by a shell
corporation more than a year ago in what is commonly known as a
reverse merger. There are 10.5 million shares outstanding, 2.5
million of which are in the float. For a rundown on the status of the
closely-held shares - are they restricted, under what terms, etc. -
we were referred to ZiaSun CEO Tony Tobin, who lives in Hong Kong.
Tobin did not respond to our questions, either through Veritas or a
direct email. So much for informing investors.
Trading Frenzy
More than 5.3 million ZiaSun shares have changed hands since March
29, with more than two-thirds of that volume trading in just eight
days. The heavy trading was preceded by a number of press releases
announcing mostly non-events, and some included ambiguous information
that could lead investors to believe the ZiaSun had some very
important business partners.
For example, this excerpt from a March 29 press release about ZiaSun's customer service center and how it can save companies money:
"America On-line discovered this fact when they developed a pilot e-
mail response center in ZiaSun's Clark facility in 1997. AOL has
expanded their own center to over 300 people, which according to AOL
management will save them US$15 Million per year.
"AOL proved to us that we were onto a worthwhile idea, and we believe
other high traffic web site owners would be glad to offer ZiaSun a
profit margin in return for saving them large amounts of dollars.
"High traffic websites like AOL, Yahoo!, E-bay, E-Trade, etc, could
save millions of dollars a year by using a service like ours. The
Internet is global, and companies which take advantage of the
benefits of this globalization will have the edge in the future."
Thinking that maybe ZiaSun is handling some of AOL's customer service
offsite in the Philippines? Guess again. AOL established its own
customer service program in the same facility ZiaSun uses, but there
is no customer service-based business relationship between the two
companies, according to Jason Birmingham, one of ZiaSun's account
reps at Veritas.
Earlier this year, ZiaSun told investors it would file its form 10SB
with the U.S. Securities and Exchange Commission by the end of March.
In March, the company said the numbers would be out in 60 days.
In the meantime, ZiaSun has released financial information on two of
its recently acquired subsidiaries - Momentum Asia and Momentum
Internet. But the information is incomplete and unaudited, so it is
of little value to investors trying to get a handle on ZiaSun's true
financial condition.
And, again, investors are fed ambiguous information, like this Nov.
17 press release touting six-month financial results from Momentum
Asia, Inc:
"Assets grew 262% to $2,100,000 from the FY1997 posting of $800,000.
The increase in assets was due to retained earnings, paid-in capital
by owners, and increases in the value of investments held by the
company."
This statement isn't entirely clear. Do they mean that these items -
retained earnings, paid-in capital and increases in investments - are
assets? Probably not, since they belong under shareholder's equity.
Or are they simply referring to them as reasons for an increase in
assets?
One other sticking point is the inclusion of "increases in the value
of investments." Generally Accepted Accounting Principles do not
allow for writing up the value of equity investments, unless your
firm's primary business is investing in the securities of other
companies. However you can write off the loss if share value goes
down. But, without knowing exactly what the "investments" are it's
impossible to tell whether the write up was appropriate.
An even more recent announcement holds few clues. An April 19 press
release heralds earnings of $0.11 per share (earnings of $1.15
million on revenues of $3.53 million) through the end of 1998, and a
2-for-1 stock split. But that's it. The auditor isn't named, there
are no actual financial statements or anything else to give investors
a sense that the figures are grounded in reality.
Again, Tobin is the man with the answers, but he's been silent.
Growing at the Speed of Hype
ZiaSun boasts that two of its subsidiaries are actually making money.
But there's no indication about how ZiaSun plans to finance its
ambitious expansion plans. Some of its better-heeled competitors are
already sinking billions into similar deals. In fact, one of ZiaSun's
press releases cites a $13 billion public-private cyberport project
being developed by the Hong Kong government and private business
partners, including Microsoft.
Momentum Asia handles the nitty-gritty side of ZiaSun's Internet
business - customer service, database management and direct mail -
while Momentum Internet is involved in the more high-profile online
areas - email service, a banner advertising network, a search engine
and a portal for brokers.
ZiaSun also says it will offer online auction services and a business-
to-business barter center, and it recently added Online Investor
Advantage to its stable. Online Investor Advantage, not be confused
with the magazine Online Investor, appears to be a Wade Cook seminar
copycat, offering people the formula for wildly successful trading -
for a price. The actual price isn't clear, since it's not posted on
the company's website and a query to Online Investor Advantage for
information went unanswered.
Although ZiaSun is traded in the U.S. and says its headquarters are
in San Diego, the company's focus is on Asia, a region many have
pegged as the next area for explosive Internet growth. But that
distance creates its own set of problems, making it difficult for
investors to get hold of company officials (there's a 13-hour time
difference), and almost impossible for U.S. investors to spec out
ZiaSun's operations.
But there's no shortage of information on the company, nor lack of
effort to promote it. ZiaSun pays at least two promoters - Veritas
and Interactive Business Channel - to hype the company. Veritas
receives $5,000 and 5,000 shares of stock each month for its
services. IBC was paid 50,000 free-trading ZiaSun shares. And then
there's all of the coverage ZiaSun's gotten on Stockhouse's Inner
Circle site, apparently a branch of Veritas - but you'd never know
that without a lot of digging and a little luck (the obscure
disclaimer link doesn't always work).
And yet there's really not much to promote.
Shareholder Hide-and-Seek
Other areas of concern include ZiaSun's trading site, Swiftrade, and
its affiliation with Amber Securities Corporation.
ZiaSun's claims about Swiftrade have been shifting almost since it
was launched. At first it was pitched as the only place to trade on
the Hong Kong and New York exchanges from one website. Now it's being
touted as the only site that focuses on overseas investors. Perhaps,
but overseas investors have access to the U.S. exchanges through any
number of brokerage firms, not to mention Internet-only traders like
E*Trade. And U.S. investors also have avenues to trade overseas
through their computers.
Swiftrade operates through Amber Securities, which along with its
sister company, Amber Capital Assets Ltd. in Hong Kong, has raised
the ire of several investors.
One reader in New Zealand said he was lured into buying ZiaSun stock
by an ACA lackey, but when he wanted to sell those shares a short
time later he got the run around. First he was told he couldn't sell
until he physically had control of the stock certificates (which the
salesman said could take three months), even though our reader was
assured that the shares were being held in his name at Amber's
offices. The hold up, according to Amber, was the transfer agent,
whose name he would not reveal. Even then, our reader was told that
he'd have to sign the certificates over to Amber's California
headquarters before he could sell them on the open market.
Fortunately our friend smelled a scam, threatened action with the SEC
and voila! his shares immediately became accessible.
ZiaSun is an unproven entity that talks big but comes up short on
facts and figures.
As always, tread lightly………………………. |
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