Time for a review....read the beginning of this thread to see how people were suckered last time around.
The new penny play - Cyberspace speeds penny stock trades
By Jim Moscou
It's Monday, Feb. 9, at a little-known chat room in cyberspace,
where a dedicated group of investors gather to play an increasingly
perilous game of penny stock investing.
The share du jour is an even more obscure Boulder concern, Travis Industries Inc.
"Dude, I take a shower and it goes from 7 cents to 21
cents!!!" read one message posted that day on the Travis Silicon Investor message
board (www.techstocks.com).
Travis stock was skyrocketing, tripling in value by jumping from about 10 cents to 30
cents, a 52-week high, in less than an hour.
Historically, Travis shares show little market life. Its price had held steady for months.
On a typical day, a few hundred thousand shares would change hands.
On Feb. 9, mostly in a span of roughly 60 minutes, 20 million shares were traded.
But by 10:15 a.m. EST, Travis' upswing started to nose dive. It didn't stop until noon,
finally settling just about where it started.
Why shares in Travis Industries skyrocketed that day remains a mystery and the subject
of much cyber-debate.
Certainly, the sudden spike raised a few eyebrows:
from investors to company officials to investigators at the Securities and Exchange
Commission.
The question many seem to be asking is: Was this yet another example in a new wave in
securities fraud --
scams using the power of the Internet, scams that can be perpetrated by virtually anyone
looking to make a buck?
While there's no evidence that officials at Travis Industries were involved in any
wrongdoing, authorities say investors in similar penny stocks, or microcaps, are
especially vulnerable.
SEC officials said penny stocks are being discussed, overly hyped and sometimes
manipulated on the World Wide Web.
This online chapter in securities fraud has become so serious that the SEC recently
created an online enforcement division dedicated to combating the problem.
At the heart of the matter is a securities revolution.
Cyberspace is revamping trading faster than any technological change since the
introduction of computers to track trades in the late 1960s and early '70s.
PR power
The rise and fall of Travis shares on Feb. 9, some say, started three days earlier.
Of particular interest to Travis followers was an otherwise innocuous press release
issued Friday, Feb. 6., announcing Travis was in "negotiations pending final completion
of a definitive agreement" to merge with another Boulder company, Planet Sports.
The press release added that Planet Sports, in turn, had "reached a preliminary
agreement" to acquire sports apparel company Next Level Sportsystems, a "concept
company that incorporated nine months ago."
According to the press release, Next Level is expecting to achieve more than $10
million in sales this year --
$60 million in annual revenues by the year 2000. The success will come by doing
business with "accounts including J.C. Penney."
A follow-up release on Sunday, Feb. 8, announcing a signed letter of intent between
Planet Sports and Travis, fueled speculation.
The hype
The Travis chat group had already started buzzing from the first press release on Friday.
"I told people on my private lists about this one some two or three weeks ago. Time and
patience!" wrote "Riley G," a former New York street cop turned self-proclaimed
psychic-detective and penny stock
investor. "Riley G" has attracted a small following of online, penny stock investors,
according to sources and postings on the chat room.
Among the 500 messages posted in the chat room in just a few days, rumors circulated
that the Green Bay Packers and Denver Broncos wore Next Level clothes during the
Super Bowl. Planet Sports' use of the word "Planet" led to posted speculation of fiscal
tie-ins to the
popular "Planet Hollywood" restaurant chain.
"All we gotta do is hype the crap outta this thing..." said
"Pugs," a Travis investor and Internet chat room regular.
By Monday morning, the penny stock was ready to jump.
Next step
Whether the Travis press releases were accurate remains banter in the Travis chat room
a week later.
Planet Sports' owner Thomas Raabe stands by the claims, including the possible
acquisition of Next Level.
"The press release is accurate," Raabe said. "I didn't say it was definite agreement with
Next Level."
After the Travis acquisition, Raabe said the new company's intention is to fund Next
Level's development in the extreme sports and urban apparel market, a move he said is
well under way.
"(Next Level's clothing) line is being marketed at trade shows for the fall season right
now," Raabe said, noting two shows specifically: Atlanta's Supershow and the Las
Vegas Magic International, both held this month.
Brian Exter, registration coordinator for Magic International, an apparel industry
showcase, said the organization has no record of and has never heard of Next Level,
Planet Sports or Travis Industries.
Officials at the Supershow said the same thing.
Also of note, J.C. Penney Company Inc. officials in Dallas said the superstore does not
have an account with Next Level.
Neither Planet Sports nor Travis Industries service or produce anything today,
according to Raabe.
Travis does have a history, incorporating in 1987 to print advertising materials and
coupons, according to SEC documents. In 1995, it filed for reorganization in U.S.
Bankruptcy Court.
Travis' latest makeover will keep the company public and renamed Planet Sports.
Meanwhile, Raabe -- who said he does not follow the online chat groups about Travis
-- called the Silicon Investor banter about the company and its sudden spike "lunacy."
The share increase "caught the company family by surprise."
"I didn't even know there was a market for penny stocks," he said.
Negotiations between Planet Sports, Next Level and Travis are ongoing, Raabe said.
Cyber-sleuthing
SEC officials would neither confirm nor deny whether they're investigating the cause of
Travis' stock surge.
There is no conclusive evidence that the Travis stock fell to what investors call a "pump
and dump" scam (see sidebar) that Monday. Pennies per share turning into dollars per
share is a more common clue to the scheme, officials said.
But Don Hoerl, lead investigator for Denver's SEC office, said any penny stock
suddenly trading 20 million shares in one day and tripling its value would "catch my
attention."
Meanwhile, in the Travis' Silicon Investor chat room, more colorful -- and perhaps
telling -- questions are being asked.
After nearly a week of online hype and little evidence that Travis is on the big-money
track, one posted message several days after Monday's spike pondered, "Does anyone
else get ice in Wonderland feeling
... ?"
Investigate before you invest
Some simple steps can keep your investments safe.
Ask questions:
Call your securities regulator and ask if the investment is a registered company. Ask if
your broker and firm are licensed to do business in the state.
You can get the number by calling the North American Securities Administrators
Association at 1-888-846-2722.
Don't believe everything you read.
Hype is hot, particularly online.
Know your broker.
Ask your state regulator if they've received complaints against the firm or broker
pushing the deal.
Know the investment.
How long has the company been in business? What are the products or services? Has
the company made money for investors before?
Get the facts in writing.
Don't get swept away by a sales pitch. Ask for the company's prospectus and annual
reports.
source: The Securities and Exchange Commission
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