"The records of the Indiana Secretary of State list “Stephen Carnes” as the Incorporator, Registered Agent and Secretary for a company called Research Capital Group, Inc – formerly known as DiabloStocks, Inc. In the past, we have received e-mails from DiabloStocks, Inc. promoting a series of obscure public companies. DiabloStocks conceded that it had received shares of the companies it was touting – just like the newsletters that have been hyping Valde Connections."
"Was the DiabloStocks that was sending those e-mails the same entity that we found incorporated in Indiana? If so, is the Stephen Carnes who is now running Valde Connections the same individual who was associated with DiabloStocks? Is that the kind of “experience” that should give investors comfort?"
VALDE CONNECTIONS, INC. (OTCBB: VLDE) PART III – IN SEARCH OF SPA-ING PARTNERS
April 28, 2003
Valde Connections, Inc (OTCBB: VLDE) has yet to open a hair salon, spa, or modeling agency, but that has not stopped a band of promoters (or perhaps just one busy tout using a variety of handles) from disseminating a seemingly endless series of e-mails recommending the stock. As we saw in Part II of this series, one notable e-mail, dated February 20, 2003, seemed to have been sent through a time warp since it referenced a series of press releases that had not yet been issued.
Was the some logical explanation for this oddity? If so, the newsletters did not provide it.
The Hype Goes On
And the promoters were not finished. Similar newsletters continued to be distributed by e-mail over the next two months – this time referring to each of the Company’s press releases after they actually were issued. In general, they repeated the unbridled enthusiasm of the earliest recommendations – albeit in a more timely fashion.
Several versions, which began to appear in our e-mail on February 24th and continued to pop up until March 2nd, again highlighted the Company’s online “sweepstakes.” Although the Company was offering a modest prize – including a trip for two to Orlando- - the newsletters were headlined “Bulletin: News is out? Once people get wind of this news we feel [Valde] will move up swiftly.”
Surely they could not seriously have believed that the prospect of a $2,500 prize could cause the shares of any company to soar.
The next series of newsletters arrived in our e-mail on February 28th, headlined “Bulletin: News is out! Once people get wind of this news, we feel [Valde] could double or triple in price.” The news? The Company’s February 28th press release announcing negotiations to open its first “store front” at an unidentified location. Such scant information was hardly calculated to cause shares to increase to any meaningful extent.
Still the promoters did not miss a beat. On March 3rd they again distributed newsletters lauding the Company’s association with Brickhouse, the personal trainer who, according to the touts, works “five or sex times a week” with one time Playboy cover girl and WWF wrestler, Rena Mero. This time they pointed to Ms. Mero’s website (which features pictures of the wrestling/sex star and photos of her cat, her poodle, her Labradors) and declared “now do you see why Brickhouse’s decision to join Valde Connections is so meaningful?”
We think most investors could answer that question with a single word. No.
Unabashedly, the promotion continued. Recently, on April 22, 2003, the Company announced plans for a “strategic consulting agreement” with Rena Productions LLC, the entity that promotes Rena Mero. According to the press release, Rena Productions LLC will help the Company develop public awareness. Valde Connections says it wants to take advantage of the “contacts” it will develop through that relationship. First, however, the Company may want to move forward with plans to open its first facility.
On March 21st the newsletters declared “[n]ews is out!” but cautioned that the latest revelations from Valde Connections were “not anywhere near as exciting as the type of news we expect very soon.”
This time the newsletters were making a timely reference to a March 21st press release from Valde Connections which said that representatives of the Company had met with an architect to discuss plans for a salon and day spa at Hilton Head’s Main Street Inn. Technically, this may have been “news” – but it hardly constituted meaningful information. Had the Company finalized an agreement with the Main Street Inn? If so, what were its terms? Investors were left to wonder.
Just days later, as Valde Connections stock inched forward a few pennies, the promoters were quick to declare that their predictions were coming true. A March 23rd set of e-mails proclaimed, in bold green print:
We informed many of you over a week ago that we expected much from [Valde] this past week and you surely must admit [Valde] did NOT disappoint! It climbed from a low of .16 on March 14 to close at .23 on March 21 for a gain of 43%. And we expect much more this week and the next also.
They did not mention that the Valde Connection stock had traded as high as 31 cents on March 3rd, and 24 cents on March 13th before dipping briefly to 16 cents on March 14th.
The stock was moving sideways – at best – not surging upward as the promoters implied. Undaunted, the promoters continued to ignore the reality of these numbers in a March 30th e-mail that began by noting with satisfaction “[o]n March 14 [Valde] was trading at .16. On Friday, March 28 [it] hit an intra-day high of .27, for a percentage gain of over 65%.”
To what did they attribute that “impressive” rise (which still fell short of March 3rd prices)? Here’s what the self-effacing touts had to say this time:
Based upon our vast experience in this business the *huge* volume on Friday March 28, coupled with the price increase from .16 on March 14 to the intra-day high of .27 on Friday March 28 VERY often portends the expectation of very good news from the Company. And IN FACT we are hearing VERY strong rumors that [Valde Connections] might well be issuing more than one announcement of very good news, spanning the next several trading days.
Exactly what constituted the “vast experience” of these anonymous stock shills? They had yet to identify themselves – beyond the various colorful names of their “newsletters.” Where were they hearing these rumors? Perhaps from the “unaffiliated” and unidentified “third-parties” whom the newsletters repeatedly acknowledged had paid them to circulate the promotional materials. Disclaimers at the end of each newsletter revealed that those third-parties had paid cash ($50,000) and delivered Valde Connections common stock (ranging from 50,000 to 150,000 shares) to have them spread the word on the Company.
As for that “huge” volume on March 28th – 594,000 shares, the most important question remains. Who was selling the stock? Or the 636,000 shares that traded on March 31st and the 559,000 shares that changed hands on April 1st.
And what of the experience of the people now running Valde Connections? The Company describes its president, Stephen Carnes, as an “entrepreneur,” but offers no details of his entrepreneurial background. We conducted a search for “Stephen Carnes,” and discovered one individual with that name who has had an intriguing professional history.
The records of the Indiana Secretary of State list “Stephen Carnes” as the Incorporator, Registered Agent and Secretary for a company called Research Capital Group, Inc – formerly known as DiabloStocks, Inc. In the past, we have received e-mails from DiabloStocks, Inc. promoting a series of obscure public companies. DiabloStocks conceded that it had received shares of the companies it was touting – just like the newsletters that have been hyping Valde Connections.
Was the DiabloStocks that was sending those e-mails the same entity that we found incorporated in Indiana? If so, is the Stephen Carnes who is now running Valde Connections the same individual who was associated with DiabloStocks? Is that the kind of “experience” that should give investors comfort?
News Yes. But Newsworthy?
The newsletters continued to arrive in early April, noting at one point that an unnamed “major” investor relations firm would soon represent Valde Connections. On April 9th, the hype became more aggressive with a “Bulletin” announcing that “after-market news is out!” and predicting that “once people get wind of this news, we feel [Valde] should move up swiftly.”
This time the news was a press release, dated April 9th, announcing that the Company had entered into a Letter of Intent to acquire a “Clinical Day Spa and Salon” in Central Florida. A statement from the Company’s CEO, Stephen Carnes implied that the acquisition was “profitable,” but offered no financial details. Indeed, the press release did not disclose any terms of the Letter of Intent or reveal the location of the salon and spa.
The press release said that the Company would continue to focus on the acquisition of profitable spas and salons, and to pursue partnerships with resort hotels. It did not suggest that any other acquisitions were imminent, or mention the status of the Hilton Head property.
Almost as an afterthought, the press release stated that Valde Connections had received a proposed term sheet from a New York based investment banking firm. The Company did not provide the name of that firm or the terms of the proposal, saying only that the investment banking firm was being engaged to raise funds for its mid-term capital requirements.
This sounds like news – but is it really newsworthy? The press release contained no meaningful details of the potential acquisition or the pending investment banking relationship.
Such shortcomings did not deter the promoters, who used their April 9th newsletters to exclaim:
Take a GOOD look at that news. A REAL good look. Now is this a serious OTC BB stock in your educated opinion? Well it *SURE* is in our opinion! It surely appears that [Valde] intends on becoming a Conglomerate. And does this not sound like [Valde] is on the verge of acquiring funding? Yep, sure does! So, is this a .30 stock? Nope, sure isn't. Try $1.25. And climbing.
We listened, took a “GOOD” look, and concluded that the “news” lacked critical details. The Company might be serious about its plans, but, so far, it had yet to open a single salon and spa, or demonstrate an ability to compete in the highly competitive world of modeling. Before the Company can become a conglomerate, it will have to prove that it can successfully operate a single business.
Needless to say, there appears to be no legitimate justification for the projected price increase. Certainly, the “news” did little to enhance the value of the Company.
As for the true value of that 30 cents stock - volume has remained high, perhaps reflecting a rush by unidentified individuals to dump shares. But, as of April 17th the price of Valde Connections stock had dropped to 22 cents a share.
Of course, the promoters had an answer for that as well. A fresh set of newsletters, dated April 20th, characterized the drop as “profit taking” in advance of the three day Easter weekend. The promoters insisted that Valde Connections remained a “huge bargain” based upon the promoters’ “vast experience in this business.”
Their efforts to resurrect interest apparently met with success. On April 21st the share price rose to 27 cents, prompting the promoters to rush out yet another e-mail, declaring:
…those who sold made a *huge* mistake. LOOK at the volume on Monday April 21 and the price gain! Why?..Because this kind of extremely high (in fact, RECORD) Volume almost always precedes major news.
How could they be so sure? The promoters again referred to their “vast experience in this business,” and confided that they had been “hearing VERY strong rumors” that Valde Connections might be announcing “VERY good news” in the coming days.
Would you want to take their word – either on the extent of their “experience,” the significance of the impending “news,” or the future of Valde Connections? By April 25th the stock price had dropped to 25 cents.
Investors can only wonder whether, at 22 cents, 25 cents, or 27 cents a share, the Company remains overpriced as well as over promoted..
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