In regards to GENI this was posted on the Yahoo message boards. Some joker on the board said that big news was going to come out at 11:00 AM and make the stock price go up. Right after 11 this was posted, my response follows:
JUST FOR THE RECORD
In response to numerous postings on chat rooms associated with GenesisIntermedia, Inc. regarding the Company's affiliation with Madison & Wall Worldwide, Inc. (formerly Continental Capital & Equity Corporation), the following is provided:
Madison &Wall is a nationally recognized, full service financial public relations firm that was established in 1992. For nearly a decade, we have prided ourselves on representing the investor relations needs of publicly traded companies. The senior management, along with several key employees of the Company, have participated in the management buyout of the Company. The founder and selling shareholder, Mr. John Manion, officially had resigned from the organization in mid-2000 after having turned over the day-to-day management of the company to its senior executives in late 1999. Although Mr. Manion has been involved with personal regulatory issues, they are in no way affiliated with Madison & Wall. Further, Madison & Wall has been audited by two different firms for every year from 1996 through 1999 (our 2000 audit has not yet commenced), and our auditors have been so convinced that Mr. Manion’s personal issues are unrelated to the company that they have not even included so much as a footnote disclosure on this matter. Our current auditor is one of the eight largest audit firms in the country.
Furthermore, as a condition to the senior management buyout of Continental Capital, we required proof from Mr. Manion that the court had unconditionally released the Company from any possible claims involving Mr. Manion’s situation. We received proof of that signed release prior to proceeding with the purchase documents.
Furthermore, we do not advocate "boiler room" tactics for increasing awareness of our client companies, however we do engage in telemarketing activities to pro-actively educate the professional investment community (i.e. retail brokers, institutions and analysts) on those companies whose fundamentals and technicals meet the expressed interest criteria from individuals within that community. Our financial relations executives are highly trained and effective marketing professionals who understand the sensitivities involved in working in a highly regulated environment and one in which they exhibit only the highest levels of responsibility, integrity and professionalism. Tours of our facilities are common and encouraged.
It is our belief that in today's sophisticated investment arena, companies can not and should not wait for the market to come to them. If they are to attract broad market appreciation for their businesses, then they must pro-actively educate this arena on the reasons why they are worthy of that appreciation. In our professional opinion, GenesisIntermedia is such a company.
Should anyone have any further questions regarding this matter, please feel free to contact me directly by calling 407-682-2001.
Professional regards,
MADISON & WALL WORLDWIDE, INC.
Dodi B. Handy
President & Chief Executive Officer
Statements made in this e-mail may not be construed as investment advice and are not a solicitation to purchase or sell securities of any above referenced company. The reader should consult with his/her own independent tax, business and financial advisors with respect to any investment, including any contemplated investment in said companies. All information contained in this e-mail should be independently verified with said company and by an independent financial analyst.
and my response:Thank you for coming to this message board and clarifying things for us. It is not often that corporate executives post on Yahoo. Before Madison and Wall changed its name it was called Continental Capital. It was then owned by a man named John Manion.
During his reign over Continental Capital the firm came under the scrutiny of the SEC and John Manion eventually was sented to 15 years in prison for stock manipulation and fraud.
His prison sentence was the result of an indictment by the Justice Department for fraud and manipulation surrounding the stock of a company called Legend Sports. 85 people were indicted in all, including stock brokers, family members of the Colombo family, and Russian mafia figures.
Manion reportedly told the people involved that he could control the share price and make it skyrocket by using the resources at Continental Capital.
Once the share price of Legend went up an army of unregistered brokers and boiler room cold callers aggressively sold the stock to unsuspecting investors. Elderly retirees in Florida were specifically targeted.
Manion was no stranger to the SEC. In 1996 the SEC alleged that Continental Capital and Manion sent 400,000 copies of a newsletter called Inside Wall Street which touted the stock of a company called First Entertainment. Manion failed to disclose to his readers that Continental Capital was paid in shares worth $700,000 for his promotion efforts.
I believe you when you say that Madison & Wall - formerly Continental Capital - is not engaged in any illegal activity. It is safe to assume that, with the new management team at Madison & Wall, all public relations and stock promotional services are being carried out within the letter of the law. I am not aware of any SEC investigations that are currently focused on Madison & Wall or any of its employees.
That said, I do not think shares of GenesisIntermedia.Com(GENI) are a wise investment.
I disagree with you on this.
For the nine months ending on 9/30/00 the company posted a net loss of $16.7 million dollars. It also reported that it had only $1.57 million dollars of cash on hand and owed $32 million dollars in notes payable. For the company to continue to function it will have to take on more debt or else carry out a secondary offering that will dilute shareholder value. On April 16th in its annual report it stated that it was exploring the possibility of carrying out a secondary offering.
Based on traditional valuation metrics GENI shares are overvalued. GENI has a Price to Book ratio of 46, Price to Sales ratio of 4.62, and a negative return on equity. The market cap of GENI is over $215 million dollars while the company has an EPS of -$1.39.
There are only 6.9 million shares of GENI publicly trading. As of May 1, 2001 insiders control 19.82 million shares. Out of these shares 9,514,269 are under the control of an offshore company called Ultimate Holdings. On April 17, 2001 Ultimate Holdings filed with the SEC to sell all of its holdings. Once this sell happens it will massively dilute the stock and will cause a drop in share price.
Faced with such a large wave of future insider selling and poor business fundamentals it is hard to justify the current market valuation of GenesisIntermedia or to explain its recent rise in share price unless one examines the stock promotional campaign launched by Madison & Wall, formerly known as Continental Capital.
On its website Madison & Wall promises that it can utilize the resources of a database with 300,000 addresses and phone numbers, 5 million investor email addresses, and telemarketers to promote stocks or as you put it "broad market appreciation."
Your company is one of the most succesful companies that do this. However, stocks that have been promoted by Madison and Wall(Continental Capital) have a history of going up during your promotional efforts and then crashing afterwards and leaving many investors burned.
On Madison & Wall's website it says that it was compensated for promoting GENI by being paid "forty-five thousand dollars cash, payable in monthly payments of fifteen thousand dollars with the first payment of fifteen thousand dollars due immediately upon execution of this agreement and subsequent monthly payments due on or before May 1, 2001 and June 1, 2001. In addition, the Publisher is entitled to receive an option or warrant to purchase up to fifty thousand common shares of the Company's common stock currently held by the Advisor, and exercisable as follows: ten thousand shares at twenty-three dollars per share, ten thousand shares at twenty-four dollars per share, ten thousand shares at twenty-five dollars per share, ten thousand shares at twenty-six dollars per share; and ten thousand shares at twenty-seven dollars per share."
What I would like to know is when are you going to end your GENI promotion? How high can you make GENI go? At what point do you think the insiders are going to cash out? I cannot get myself to go long in a stock with such poor fundamentals. But I'd like to know when everyone is going to cash out so I can short it and benefit from the inevitable crash. Will you also warn the people that you told to buy GENI before the collapse comes? Maybe they can short it too and benefit even more from your advice. |
