Tjeffries,
This is a little difficult for me to write, and I have to think twice before posting this, just because people who currently have a position in ETCR as an investment may not want to hear it ; but I want to freely express my opinion, and feel that I should tell it as it is without sugar-coating. Remember this is only an opinion base on my understanding of the situation, you are encourage to do your own dd. On the bright side, the situation does not change my point of view about the trading opportunities of this stock for a quick profit ; however, long term investment in ETCR is another ball game, which I don't want to get into.
Pumping to sell shares is an old game in the BB land, and that's what I think is happening in this case. I have a few theories, but the one that make the most sense have to be the insiders were looking for a pump to sell into as you said. I never seen any dividend structured like this before, and the credibility of the management flew out the window the minute they call this a dividend. This is acting like a forward split in disguise to fool the public, where shares being dilute by an incredible amount. Management has no control regarding how many shares being diluted (potentially reaching billion, ..I will explain how on another post), and no owner/management that hold large interest in the company would structured anything like this to see the value of their shares evaporate in thin air, especially when they don't participate in the dividend.
If you look at the trading history of ETCR. It was a very dead stock and very non-liquid. There were many days ETCR had no trading at all, and 100,000 volume trading was consider a good trading day until May 15th 2001. Another example of the non-liquidity of this stock was on July 13th 2001, it was the last day to buy ETCR to qualify for the dividend, and there were only 88,000 shares traded on that day. Did it make any sense at all when you could buy a 25 cents stock to get $1 dollar dividend and there were no taker on the last day? Who bought and sold shares of this stock in May and June 2001 when volume were in the millions? It was certainly not the general public.
There were lots of shares traded during May and June 2001 (not at the peak, but during the run up), and I have to assume that they dumped during these two months. But in fairness, two things that still baffle me were, eventhough volume increased during those months; from the dollars point of view, it was not much money worth putting everything at risk to set up such a scheme. Also, my quick search into insiders selling came up empty, there were no history at all about insiders trading history.
There are many other ways insiders can sell shares without disclosing to the public, but that is another topic all together.
Regardless of what happen, for sure your share today will worth less on July 16th 2002, when there will be tons of new shares hitting the market. But the next 2 months is another ball game to play when the average Joe anticipate the dividend, have to buy back shares, and the opportunity for special interest groups to pump again. How the management are going to deal with the situation after July is another question I don't have answer for. Management already did a reverse split in July 2000, may be they have to do another one, I don't know. I guess we will have to wait and see.
Take it for what it worth!
Dai |
