Well, the interesting thing about these non-reporting BB companies is that it is no longer possible to even know who the originating brokers are. I know them personally and I can tell you that when it comes to getting deals done in all penny markets, the people who have the least number of free trading shares is always the guy with the idea.
The guy with the idea never seems to have money, so when he hooks up with brokers (who have lots of their own money and client money), the brokers hook them up with a bulletin board (or some other type) of shell company that they control. Read: The broker and his clients own all of the stock. It is not a pretty game. Remember the book, Where are All the Customers' Yachts?
I have no problem with this type of transaction because it is done in the Wild West fashion, or perhaps I have gotten jaded over a long career in Vancouver brokerage houses. It is buyer beware; however, investors never believe it and develop an unqestionable faith in "their" deal, not knowing why or how deals get put together.
You see, brokers are not in the business of hitting home runs. They are in the business of owning as much cheap paper as possible in as many deals as possible, and structuring them as tightly as possible to ensure that it goes up...and they sell all their paper into volume. After the mission is accomplished, the stock collapses, and they buy it all back in the pennies and do it all over again. This is their business. This is how the $100 Cubans, the Porches, the Whistler ski cabins, the houses on Point Grey road...how all the perks are paid for. If you look at the careers of most of these brokers, you will not find a single deal that went up and stayed up, meaning that they never hit a home run ever, but they have all these toys...and where did all this money come from?
So the bottom line for investors? Forget morality and ethics. Save these for a philosophy course. If there is volume, then by all means trade the deal if you must but when it loses momentum, dump it. Don't become a bag holder. Don't fall in love with it, because there will be another deal right around the corner and you can get on board. |
