Beware of penny stocks touting big name lab connections
Posted Dec 16th 2007 1:10PM by Zac Bissonnette
Filed under: Marketing and advertising, Scandals
In the past, I've written about mPhase Technologies (OTC: XDSL), an obscure penny stock that has been touting its technology on YouTube, and has hired Jonathan Lebed, who settled stock manipulation charges with the SEC as a teenager, to pump its stocks.
Oh, and the CEO, Ronald Durando, recently signed a consent decree with the SEC and agreed to forfeit $150 thousand in gains derived from an alleged pump-and-dump involving a now defunct company called PacketPort.
Given that series of red flags, why have investors given mPhase, a company with a long history of big losses, a market valuation of nearly $25 million? At least part of it probably stems from the companies much-hyped research it is conducting at Bell Labs.
A piece in Sunday's New York Times talks about this trend of companies conducting research at universities. It's a great deal for the labs for one reason -- they get paid:
A vanguard group of universities is giving corporations greater access to ivory-tower laboratories -- for a price. Stanford has paired with Exxon Mobil in a deal worth $100 million over 10 years. The University of California, Davis, is getting $25 million from Chevron. And Intel has opened collaborative laboratories with Berkeley, the University of Washington and Carnegie Mellon.
Of course, big companies are setting up research partnerships with universities for access to their labs and minds. But an unscrupulous penny stock promoter can easily find a lab willing to take some money to allow it to conduct some sort of research there -- and then promote it in press releases, dumping the stock on an unsuspecting public.
Bottom line: When evaluating a stock, look for earnings, sales, and good corporate governance. Don't be impressed by big-name connections, licensing agreements, and "deals."
Tags: Bell Labs, Jonathan Lebed, mPhase, Penny Stocks, Ronald Durando, XDSL
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