Creede, if a company is a non reporting pink sheet, they deserve absolutely no benefit of the doubt. None. Zilch. Treat them as a full-fledged scam. I mean in your own mind, of course. At least until you see red flags that are typical of scams. Then, at your discretion, share them with others to see if perhaps you might be mistaken.
If companies are legitimate, there's absolutely no reason why they wouldn't want to put it in writing with the SEC. After all, if you don't want to be public, why be a public company?
Just because a company files its form 10s doesn't make it automatically legitimate. Companies lie. That's where auditors come in. They are supposed to sniff out the lies. Sure, as Enron proved, auditors can prove useless, but at least the odds of getting reliable financials tilt greatly in your favor.
The people that make money in non reporting pink sheet stocks are the ones who trade on the greater fool theory. They'll speak about how wonderful the CEO is, how useful the product is, how if the company only got a fraction of the multi-billion dollar industry they are in your shares would be worth dollars, not cents. The momentum from all the fools rushing in to ride the rising star makes their wish of a rising share price self-fulfilling.
Meanwhile, the touts are busy selling and, if cornered, will tell you only fools don't take profits when presented to them. They sell enough to make a decent profit and hold their remaining free shares just in case it keeps going up. The difference is, people like you continue to believe in the dream and don't sell.
As a "basher" I can always spot the sheep vs the touts. The sheep are fervent true believers. They have large investments they are holding until the stock skyrockets and their dream is fulfilled. They get extremely nervous and protective and are, naturally, quite opinionated.
The touts, on the other hand, just try to blow enough smoke to keep the true believers calm. The insidious among them will use platitudes like "we really can't prove this or that" or "everyone is innocent until proven guilty". They'll divert your attention from looking at red flags to looking for absolutes. Once you submit to this logic, you might as well just type "bah bah bah" and prepare to be sheered.
The absolute worst thing you can do is make a planned trip to the company. Think Jane Fonda visiting Hanoi.
Happy trading.
- Jeff |
