GENI-Pump & Dump POS
Timing WallStreet.Com - 4/26/01
TraderMike - Genie in a Bottle: The Anatomy of a Pump & Dump
Howard Q&A Forum - Sector Charts
TraderMike - Genie in a Bottle: The Anatomy of a Pump & Dump
Go rent the movie Boiler Room. Watch it two or three times. The movie shows you a glimpse into the underworld of Wall Street. The places that CNBC won't talk about. A place where stock manipulators and pump and dump operations rule. Outright scams and tricks are created everyday to try and steal your money in this stock market confidence game.
Most of this stuff takes place on the penny stock Nasdaq over the counter bulletin board market. Here stocks aren’t closely regulated by the SEC and there are thousands of so called blank check companies that operate. These are companies that have no revenue, no assets, all they are are stocks. These creatures inhabit the penny stock world and prey on the sucker.
Here is how it works. Joe Blow sets up his penny stock company and then hires boiler room type operations to create a demand for the stock. The pump and dump websites and con artist message board posters which you see all over the internet get into action. Then once the price goes up he dumps on to the unsuspecting stockholders who think they got in on the next best thing. In sophisticated games the big shareholders set up offshore accounts to shield their identities from the public.
I’ve identified one such operation going on right now with the stock in a company called GenesisIntermedia.Com (GENI) that is listed on the national Nasdaq exchange. It is a story laced with crimes that stretch all across the globe.
The company itself markets products through infocommercials. It also owns a car rental agency and operates internet portals in shopping malls. None of its business are profitable and it has almost run completely out of cash and is in debt.
A few months ago it tried to buy Fashionmall.Com(FASH) in exchange for stock, but Fashionmall.com rejected the offer. Fashionmall.com has a lot of cash on its books and that is probably why GENI tried to buy it.
GENI’s equity and debt financing has come from an offshore Bermuda company called Ultimate Holdings, which also is a majority stock holder in the company.
The stock has been heavily shorted and has recently undergone a huge short squeeze. Yesterday the President of the company sent a letter to all of its shareholders asking them to force short sellers to cover the stock by calling in their shares. The company also released a press release detailing the letter: an action that in effect was a warning to short sellers.
Such campaigns by companies almost always end in disaster. Microstrategy pursued a similar course a year ago and has since seen its stock plummet over 90%. In the case of GENI there are reasons why the CEO is in a panic to make the shares go up. What is going on in GENI is outright manipulation.
On April 17, 2001, GENI filed a curious document with the SEC: a registration filing to sell 10,615,884 shares owned by insiders. The public float for the stock is only 6.9 million shares so this insider selling will dilute the stock and cause a price collapse.
Some interesting facts can be gleamed by closely scrutinizing this sec form. You can read the whole thing for yourself at:
sec.gov.
8,570,214 shares are being sold by Ultimate Holdings. In return for giving GENI enough credit and cash to stay afloat Ultimate Holdings has been given millions of shares. Through warrants Ultimate Holdings has an average cost basis of around $2.33 a share. The shares are now trading above $11 so Ultimate Holdings stands to make a tidy profit by selling. You don’t need to do the math to see that.
So who is Ultimate Holdings? That is the next logical question. Well Ultimate Holdings is an offshore front for a man named Adnan Khashoggi. You may never have heard of him, but he is one of the wealthiest men in the world and a big name on the stage of geopolitics. He is one of the largest, if not the largest, arms merchants in the world. Khashoggi lives in Saudi Arabia and makes millions of dollars a day selling weapons to the various factions inside Lebanon.
He was born in Saudi Arabia in 1935, the eldest son of a Saudi doctor. He moved to the United States at the age of 18 to study at the University of California where he became fluent in English. It also was the scene of his first business success.
Adnan set up a trucking business. He bought American Kenworth trucks and sold them to customers in Saudi Arabia. After three semesters at UCAL he transferred to Stanford and quite school after a single semester so he could focus on his trucking business. He netted $3 million dollars in 2 years and was only 20 years old.
A few years later he returned to Saudi Arabia and set up a new business, the Al-Nasr(Victory) Trading and Industrial Corp. With this business he served as the middle man between Rolls-Royce, Marconi, Chrysler, and wealthy Saudi Arabians. He soon became a private confidant of King Faisal of Saudi Arabia.
Through his connections with large American corporations and wealthy Arabians, Khashoggi soon turned all of his attention to a much more lucrative market: international arms smuggling. Lockheed Martin paid him more than $100 million in commissions for one deal to sell Hercules transports to the Saudi government. Raytheon paid him another $100 million to build a defense system outside of a key Saudi oil port. Northrop Corporation confessed to a US Senate investigation that it had given him over $450,000 in bribes to sell 50 F-5 fighter planes to the Saudi Air Force. But he was only just getting started. Within a few years he was dealing in arms all over the world. He briefly got five minutes of fame on American television for being the key broker in Oliver North’s Iran Hostage deal.
He reveled in the publicity and became a key figure in high society. He lived as if he was the richest man in the world and liked to brag that he was. Now through his Ultimate Holdings company he is playing games with American investors who were naive enough to buy stock in GENI.
Several years ago Khashoggi bought a DC-8 airplane for his own private use. On board is a $200,000 Russian sable spread covering his 10 foot wide bed. On his 50 birthday he celebrated with a procession of Armor clad knights on horseback led by an actor playing Henry the VIII. When the old king appeared he kneeled in front of Khashoggi he extolled his contributions to "the brotherhood of man." Several hundred miles away children were being killed by landmines that he sold. You can read all about Khashoggi in the book Khashoggi: The Rise and Fall of the World’s Richest Man by Ronald Kessler.
GENI has been going straight up thanks to the short squeeze, but eventually it will crash as Ultimate Holdings dumps on the public. The question is how high can they make the stock go and for how long? I've seen these types of plays before and a trading pattern emerges. Usually the market maker who works the large selling order takes over. He'll gap the price up a bit on the open and sell. Then do nothing the rest of the day. When the close approaches he buys a few shares and drives the price backup. On candlestick charts you'll see "hanging men formations." This is when the intraday range is below the opening and closing prices. You see a line going down with the close/open at the top. We're starting to this type of action now in the stock. I'm going to take one small short position in the stock shortly. I believe it is beginning to fall - however if I am wrong and they begin to manipulate it higher I'm going to let it stop me out and short again later.
I called GENI today and the CEO answered the phone. He told me that Ultimate Holdings was beginning to sell, but assured that it would have no effect on the stock price. PAYX about to fall and MNMD is about to go up. |
