From stock detective..
June 8, 1998
Thanks to the Stock Detective's vigilant readers and a bevy of stock promoters, we're flush with tips about stocks that most people should think twice about before investing. All them may not warrant full Stinky Stock status, although we're sure a few inevitably will come from this list. Until they reach that benchmark, Stock Detective wants to warn readers about stocks that should have you seeing "red." What sets them apart? Take your pick: volatility, high volume, wild price swings, outrageous claims, a stack of vacuous press releases, or maybe a share price that doesn't seem to add up from the sum of the company's parts.
As always, tread lightly.
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Mountain Energy (OTCBB: ICVI), formerly International Casinos Cruises Inc., recently shed its guise as a gaming organization (it only had an interest in one gaming boat) and decided to become an energy company. Mountain Energy claims ownership of coal and gas reserves conservatively valued - according to them - at more than $200 million, tucked away in previously inaccessible sites in the West Virginia hills. This stock has all the classic signs of a pump 'n dump: changing to an industry unrelated to prior focus, a vicious run-up in share price (from $0.04 to almost $2 in two weeks) and weak fundamentals that don't support what the company plans to do. There are 70 million shares of ICVI outstanding, 50 million of which were issued as restricted shares for the purchase of Mountain Energy. Who controls the other 20 million shares depends on whom you talk to. The company lists two contacts on its press release for investor relations. According to Joe Gort, shareholders in the original shell control about 5 million shares. According to George Guttman, the shell owners control all 20 million remaining shares. Confusing? You bet it is, but it makes investing in the company an even easier call. Oh, and did we mention it's non-reporting with the SEC?
Digitcom Corp. (OTCBB: DGIV) is a company staking its fortunes on long distance phone service in Mordovia (it's somewhere in the middle of what used to be the Soviet Union), and Internet service in the politically and economically scalded Indonesia. What more could an investor hope for when shopping for a bargain? Solid information on Digitcom Corp. is hard to come by. It does not file with the SEC and even its promoter, WorldVision Financial Group, is cagey about discussing the company. WorldVision did not return phone calls inquiring about Digitcom. But a little digging turns up a few numbers. According to the company, it made a $293,000 profit last year. But that's according to Digitcom. There are no audited financial records available for public review, and even the profit estimate appears to be based on unaudited documents. There was no apparent reason for a recent stock spike, which took shares of this company to a high of $8 in early May.
Global Games (OTCBB: GLOW) is a curious investment for several reasons. First, it has that signature peak and valley of so many penny stock pump 'n dumps. But looking beyond the vagaries of the market, the company compounds its image problems with empty press releases and baseless predictions. For example, it's forecasting "net revenues of approximately $7 million this year and a sizeable earnings contribution" for one of its subsidiaries, Electronic Card Services Inc. But there are no hard facts or numbers to back up this speculation, since Global Gaming does not report to the SEC. It's not clear what, exactly, Electronic Card Services sells, but it appears to be pre-paid cards that allow users to enter chat rooms and dating. Nor is it clear what Global Gaming does. There are press releases about agreements to manage gaming operations for at least one organization in Canada, and another that discusses licensing software to a company that runs an online Bingo game. Trading volume in Global shares has, at times, been tremendous, reaching almost 20 million shares, out of a 31-million share float, during one week in April.
Veronex Technologies Inc. (OTCBB: VXTK) is just another face in the growing field of companies claiming to have THE answer to the world's Year 2000 computer glitch. However, Veronex doesn't appear to have any proven product, but claims that its program is a one-stop quick fix for most large corporations with COBOL-based systems. Another warning sign to investors is the company's stock price. After an apparently successful mini-pump in April, when shares rose to almost $16, the price dropped by almost two-thirds in less than three weeks. Now the stock appears to be on the rise again, luring a fresh batch of investors. None of this is lost on long-time penny stock fans who will remember Veronex as a heavily promoted penny mining stock. Perhaps they're betting Y2K solutions are the next fool's gold. An added note: In February, Veronex proudly announced a licensing agreement with Venture Tech 2000, a California computer company. Last week, Venture Tech 2000 was raided by investigators based on an affidavit claiming that Venture Tech 2000 lied to investors and sold unregistered securities, according to a story in the L.A. Times. Nor is it likely Veronex did much due diligence on its prospective partner, or they would have known how unlikely it is they'd ever get paid. According to investigators, the company had only $2,000 in assets.
American Access Technologies (OTCBB: AATK) came to our attention recently when its share price began a sharp ascent after climbing steadily since last fall. The puzzle is how a company that may have a viable product, but has virtually no track record and a mere $439,000 in shareholder equity, can boast a stock price approaching $20, giving it a market value of more than $60 million. American Access is marketing a product that it claims will revolutionize the way buildings are wired for phone and computer systems. But they don't have a corner on the market, and there's plenty of room for competitors. Potential investors will also note that the company issued 800,000 shares of free-trading stock to a bank in the Grand Cayman Islands.
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