OK... S-8 watch is on. But suppose this: With regard to shorting free stock.
Imagine yourself (being the promoter) getting say... 100K of a $2.50 stock (This is about the going rate for the big promoters-although its coming down every day- just look at the disclaimers on the subway.com>> this guy's price has fallen dramatically) to "promote" DPCI... You know the OTCBB sucks and trying to get volume in on a stock is next to impossible without some gimick like a forward split. UNLESS the company is real and has revs/profits; in most cases the real companies feel no need to get a promoter involved especially if they were scorched before by a promoter... and many of them have been. Take care of the biz and the money and increase in stock price will follow.
I want to say again, before I go on that there is good promotion and bad promotion. Good promotion is done through brokers, NRs and the promoter invests his own money and takes options... or will buy stock directly from the company to give the company money to work with. Sometimes this is done with a "cross" of a block of shares showing up as a big trade.
But, in most cases, many of the promoters out there do nothing but free shares. No way they are going to put their money on the line because they know the company is desperate.
And... these FREE SHARE promoters promote themselves to hundreds of companies a week hoping to get a "bite" from one of them. The promoter then shows them their track record of promotion (almost always falsified along with a list of references that are their buddies and co-conspirators who get a cut of the deal) and the company is swooned (remember, they are desperate). Also remember that many of these companies only have web pages or a partial business plan (if that) and NOTHING else.... No business, no revenue let alone profits... its all just an idea. And, I hate to say it but in some cases (and this is the market at its worst) there is no intent of doing a business...
What happens is a group or an individual will go in and buy a shell... they will then cook up an artificial business to put into it. The object is to buy a shell and the stock associated with it for $300-400K then take it out on the market and sell the shares for something higher than what they paid for it... in many cases this is easy because they have millions of shares that they can value at any price they want-or take the stock as-is and use the Reverse-Take-over thing to move the price up.
So, say you get a shell for $300K with 25M shares, take it out at $1 offer... now... here is the hard part: Get people to buy the stock. This is solved by giving a promoter $200-400K worth of stock (remember the insiders have $millions in paper with no liquidity unless the promoter does his job well) to go out and beat the bushes for buyers. These buyers are buying something that is essentially totally worthless. But, the insiders and the promoters are selling their stock to the unwary investor.
Then in the worst-case scenario, and there have been a few of these; The promoter gets his stock in the form of a CERTIFICATE. The promoter then starts the promo by selling a few of these shares without the cert clearing yet. He continues to sell while getting the promo underway by getting other individuals involved with the promise of a BIG PAYDAY... ie they will get 1000 shares of stock that is currently $1 but because its such a good deal they can sell the stock at $3. In the meantime any volume the promoter brings in is being offset by the promoter selling his shares... again he still does not have the stock and has a good relationship with his brokerage house and passes millions of dollars through the account a year... so he has a free pass to do whatever he wants.
So, he is essentially selling the stock short. He knows the stock is going to be worth 25% to 50% less when he gets and deposits the cert and it clears... this happens when there is not enough volume and the promoters and insiders begin to think the promo is not going to work and they all start selling... the price of the stock plummets. But the people with the shares in cert form (the promoter) sold his stock first....
Once the cert clears, he is done... he sold his stock at $2.50 to $3.00 on the hype... the shares clear at .50 or less and cover the short... simple as that... the promoter gets out first and leaves the poor souls who bought on the hype and the insiders (unless they sold too) holding the bag.
Now, it is not always the promoter who is the crook... in many cases (probably half) these insiders on the deal will cook up all this false and misleading info to make the promoter think he has landed the deal of a lifetime... the one that will enable him to retire. As in the above case, the insiders put themselves on the offer and sell, sell, sell... the price begins to go down and the promoter(s) panic and begin selling too... this leads to a horrible situation where the stock begins at say $1 and winds up under a dime in a matter of days... what about all those traders/investors who believed all the hype and bought at $1?
Bottom line is this: There are a lot of ugly games out there. People are making lots of money and are doing it by deception.
The only way to be sure about an investment is to buy something that has FILINGS, a history of a business, making some phone calls and checking out the company yourself.
I made this mistake on DCPI... will never happen again. I thought the sheer thought of doing a 10:1 or 5:1 would cause a buying frenzy... it did. We all bought the company and the promoter's shares. They have cash now... we have a stock of questionable worth or have a lot less cash than what we put into this.
Finally, I can tell you this... I have some influence and am investigating DPCI now... in fact, the newsletter hype is still coming in through my email. I get all the stock promoter newsletters so that I know what NOT to buy.
I question the validity or even existence of the business that is going into DPCI.... here is one of the stock promoters letters here:
DP Charters, Inc. (OTC BB: DPCI)
Recent Price: $2.50
52-Week Range: $1.125 to $3.875
Outstanding Shares: 7 million
Market Cap: $17.5 million
Website: www.trilucent-technologies.com
Summary:
- For investors, a very exciting company exists that could benefit.... BLAH, BLAH ,BLAH, DE BLAH BLAH.... and on it goes for two pages of wonderful crap......
------------------------------------------------------------
Disclaimer: Special Report, published by XXXXXXXX is an
independent publication etc... Then read on and of course they are well disclosed...
This advertisement does not provide an analysis of the Company's financial position. XXXXXX of this advertisement has been paid 15,000 free trading DPCI shares from a third party and for the preparation
and electronic dissemination of this report and other consulting services. This compensation should be viewed as a conflict of interest BLAH, BLAH, BLAH what a scam.
Need I say more? And... they are not the only promoters of the stock.... there are many.
Tom |
