IBUY is a very interesting situation. The company just has an internet storefront; ie you can buy things through their website. That's it-not much in the way of competitive barriers. In fact, for the last nine months on revenues of $385,000 they have only made a 5% gross margin. In other words, before the cost of shipping, handling, people, website costs,advertising and any other normal overhead, the company only makes 5% profit.
In those same 9 months the overhead was $2.4 million. So the loss was $2.4 million. So what else is new, a $100 million market cap internet company that losses money, right? Well compare it to
the others with higher margins & some sort of a competitive barrier & it still looks like just more hype. Its the scum involved that make it
intersting.
The interesting thing about this company is the manipulation going on in the stock. The underwiter in the deal, Waldron and its clearing firm,Wedbush are battling the shorts who don't need an uptick in this stock as that is the rule for a bullitin board stock.Waldron has effectively cornered all of the supply of the
stock and has been dong buy- ins at prices that, are by NASD rules,
indefensible.
By this I mean that IBUY may trade between 24 and 25 during normal a
trading session as it did yesterday, Friday. Then after the market closes,Waldron/Wedbush prints 40,000 shares as a late reported trade (but supposedly during market hours) at 29/share. This is half the trading volume in the stock for the day and almost $4
higher than it ever traded that day. Who sold the stock and who bought
it?
The short sellers sold it- unwillingly, they were bought in by Waldron and Wedbush.The buyer was Waldron's proprietary trading account. For a nice fraudulent print that is $4 above where the allready highly inflated stock price is-a total profit of $160,000.I can fax you the nasdaq trade bloters-this is truly an amazing thing-the gaul of it all. This has already happened several times, so the numbers
are getting sizeable. One of the bigger shorts in the stock is Fiero
Bros. who took down Hannover Sterling (bankruptcy), 6 of its bs offerings (to zero) and the clearing firm (almost singlehandely). So, Waldron has taken on a quite formidable opponent. For details on that story, see the Fortune article of July, 96 entitled
The Seamy Underside of Wall Street (or close to that title).
In the case of IBUY, Fiero has allready been to court in New York and
California and the NASD is fully knowledgeable of the allegations, but they are, as usual dragging their feet. The situation is boiling and several brokers have left Waldron as they were not allowed to sell out their customers as the president of the firm, Carey Perle, has instructed the traders to accept no sell orders in
order to prop up the stock price. Waldron has not been in compliance of reg T minimum capital requirements. Something is going to give very soon and the stock will plumet back to the sub $5 level where these subterranian things belong.
The story is and will become even more interesting.
I have a copy of the California court papers, you can visit Shopping.com on the net and you can go to freeedgar.com to read the S-2. BTW, McNulty who runs IBUY has had his share of SEC run ins and it is disclosed in the prospectus-not exactly
your clean cut 24 year old internet start-up entrepreneur. |
