GOD SAVE THE QUEEN....THINGS THAT GO THUD..........
MYSTERY STOCKS by a writer for tigerinvestor.com
Mystery stocks are like mystery meat sandwiches. You don't really know what's inside until you bite into one. But you may regret that decision later.
XSNI (X-Stream) first came to my attention when a poster on SI left a short note on my "50% Gains" thread promising XSNI would take off soon, along with the company's URL, x-stream.com. His exact words were "…little secret that will become rather big…..you heard it here first…". No numbers, no financials, no links except for the company Web site (which has no financials or other corporate info apart from a contact E-mail address and press
releases).
I'm as curious as the next guy so I called up XSNI on Yahoo (always my first stop for basic research) and found a Bulletin Board stock with no chart, no news, no financials, nothing at all. First warning sign.
A quick check with Edgar (www.sec.gov) and Free Edgar
(http://www.freeedgar.com/) turned up no filings for XSNI or X-Stream. Second warning sign.
Next I wandered over to the SI thread on XSNI, which was started by the same guy who posted on my thread in the first place. The date on the thread header was May 6, only one day before XSNI started to take off. More warning signs.
Then we get to my favorite part of the story. The XSNI thread header says the company "goofed" and listed its stock on the Bulletin Board instead of the NASDAQ. Like we are really supposed to believe that British company executives are too preoccupied with tea and cricket to notice which exchange their stock would trade on? Come on.
The story gets better. One poster claimed to have done some Due Diligence,which revealed that the company has 34 million shares outstanding with 19 million in the float. OK. But then he claimed that management control 90 - 95 % of the float. Excuse me? By definition, the "float" is stock which trades freely on the open market, not held by insiders (you know, stock that "floats"
around the market). So which is it, a float with 2 million shares or 19 million shares?
Next came the siren song of BB stocks. Another XSNI "expert" revealed a "secret naked short" position held by devious Market Makers (MM's) who would have to cover in a panic when XSNI moved to the NASDAQ exchange (remember, that's where management wanted XSNI to trade in the first place, according to these posters). This is always a great ploy since ordinary investors can't verify the claim.
On top of that, new buyers were exhorted to "call your certs" or ask their broker to have physical stock certificates delivered instead of holding the stock in a margin account where it could be borrowed and shorted.
Except most retail investors can't short BB stocks and MM's can always short naked (without actually borrowing shares). Details, details.
The final nails in the coffin came when Reuters announced that AOL would reduce rates in Britain by 40% to compete with free ISP's (like XSNI). But XSNI wasn't mentioned in the article. They did note, however, that there are now more than 70 free ISP's in Britain alone.
Then a poster on the XSNI thread found an article from The Express in London which pointed out that XSNI has gone through several corporate name changes in the past few years. In fact, one of its predecessors (Firecrest) was expelled from the AIM exchange in 1996. Firecrest became Super Phone which became Megacomm and eventually X-Stream. A real shell game.
That's when I decided I wouldn't get near this stock with a barge pole. By Friday afternoon XSNI had moved from $3 to $4 on the growing hype. The chart shows a large volume spike around noon as the price climbed steadily upward -the lucky traders bought their tickets early. In true pump and dump fashion, XSNI closed at $5.25 that day, surely an omen of big things to come.
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