<ZSUN> required reading from StockDetective.com (Stinky Stocks) financialweb.com
Sunburn
ZiaSun says it will be Asia's gateway to the online world, but
could it simply be headed into the sunset?
By Lynn N. Duke, staff writer
ZiaSun Technologies Inc. (OTC BB: ZSUN) seemingly came out of nowhere in the past month,
trading more than 2.3 million shares in four days while its share price more than tripled.
What's behind this upstart? Not much, so far as we can tell besides a slew of press releases and
some pretty outrageous hype.
ZiaSun claims it will be Asia's portal to the Internet, and promises to offer everything from online
auctions to free email. But the recent meteoric rise of its stock price and volume hit several notes
on the Stinky Stock scale.
We got a little nervous right off the bat when it turned out the company's "world headquarters"
shared a phone number with a Vancouver, B.C.-based stock promoter, Veritas Group. Several
people at Veritas, which is handling the company's investor relations, were unable to answer some
pretty basic questions about the company's stock structure or its business plan.
But here are the bare bones: ZiaSun was acquired by a shell corporation more than a year ago in
what is commonly known as a reverse merger. There are 10.5 million shares outstanding, 2.5
million of which are in the float. For a rundown on the status of the closely-held shares - are they
restricted, under what terms, etc. - we were referred to ZiaSun CEO Tony Tobin, who lives in Hong
Kong.
Tobin did not respond to our questions, either through Veritas or a direct email. So much for
informing investors.
Trading Frenzy
More than 5.3 million ZiaSun shares have changed hands since March 29, with more than
two-thirds of that volume trading in just eight days. The heavy trading was preceded by a number of
press releases announcing mostly non-events, and some included ambiguous information that
could lead investors to believe the ZiaSun had some very important business partners.
For example, this excerpt from a March 29 press release about ZiaSun's customer service center
and how it can save companies money:
"America On-line discovered this fact when they developed a pilot e-mail response center in
ZiaSun's Clark facility in 1997. AOL has expanded their own center to over 300 people, which
according to AOL management will save them US$15 Million per year.
"AOL proved to us that we were onto a worthwhile idea, and we believe other high traffic web site
owners would be glad to offer ZiaSun a profit margin in return for saving them large amounts of
dollars.
"High traffic websites like AOL, Yahoo!, E-bay, E-Trade, etc, could save millions of dollars a year
by using a service like ours. The Internet is global, and companies which take advantage of the
benefits of this globalization will have the edge in the future."
Thinking that maybe ZiaSun is handling some of AOL's customer service offsite in the Philippines?
Guess again. AOL established its own customer service program in the same facility ZiaSun uses,
but there is no customer service-based business relationship between the two companies,
according to Jason Birmingham, one of ZiaSun's account reps at Veritas.
Earlier this year, ZiaSun told investors it would file its form 10SB with the U.S. Securities and
Exchange Commission by the end of March. In March, the company said the numbers would be
out in 60 days.
In the meantime, ZiaSun has released financial information on two of its recently acquired
subsidiaries - Momentum Asia and Momentum Internet. But the information is incomplete and
unaudited, so it is of little value to investors trying to get a handle on ZiaSun's true financial
condition.
And, again, investors are fed ambiguous information, like this Nov. 17 press release touting
six-month financial results from Momentum Asia, Inc:
"Assets grew 262% to $2,100,000 from the FY1997 posting of $800,000. The increase in assets
was due to retained earnings, paid-in capital by owners, and increases in the value of investments
held by the company."
This statement isn't entirely clear. Do they mean that these items - retained earnings, paid-in
capital and increases in investments - are assets? Probably not, since they belong under
shareholder's equity. Or are they simply referring to them as reasons for an increase in assets?
One other sticking point is the inclusion of "increases in the value of investments." Generally
Accepted Accounting Principles do not allow for writing up the value of equity investments, unless
your firm's primary business is investing in the securities of other companies. However you can
write off the loss if share value goes down. But, without knowing exactly what the "investments"
are it's impossible to tell whether the write up was appropriate.
An even more recent announcement holds few clues. An April 19 press release heralds earnings of
$0.11 per share (earnings of $1.15 million on revenues of $3.53 million) through the end of 1998,
and a 2-for-1 stock split. But that's it. The auditor isn't named, there are no actual financial
statements or anything else to give investors a sense that the figures are grounded in reality.
Again, Tobin is the man with the answers, but he's been silent.
Growing at the Speed of Hype
ZiaSun boasts that two of its subsidiaries are actually making money. But there's no indication
about how ZiaSun plans to finance its ambitious expansion plans. Some of its better-heeled
competitors are already sinking billions into similar deals. In fact, one of ZiaSun's press releases
cites a $13 billion public-private cyberport project being developed by the Hong Kong government
and private business partners, including Microsoft.
Momentum Asia handles the nitty-gritty side of ZiaSun's Internet business - customer service,
database management and direct mail - while Momentum Internet is involved in the more
high-profile online areas - email service, a banner advertising network, a search engine and a portal
for brokers.
ZiaSun also says it will offer online auction services and a business-to-business barter center, and
it recently added Online Investor Advantage to its stable. Online Investor Advantage, not be
confused with the magazine Online Investor, appears to be a Wade Cook seminar copycat, offering
people the formula for wildly successful trading - for a price. The actual price isn't clear, since it's
not posted on the company's website and a query to Online Investor Advantage for information
went unanswered.
Although ZiaSun is traded in the U.S. and says its headquarters are in San Diego, the company's
focus is on Asia, a region many have pegged as the next area for explosive Internet growth. But
that distance creates its own set of problems, making it difficult for investors to get hold of
company officials (there's a 13-hour time difference), and almost impossible for U.S. investors to
spec out ZiaSun's operations.
But there's no shortage of information on the company, nor lack of effort to promote it. ZiaSun pays
at least two promoters - Veritas and Interactive Business Channel - to hype the company. Veritas
receives $5,000 and 5,000 shares of stock each month for its services. IBC was paid 50,000
free-trading ZiaSun shares. And then there's all of the coverage ZiaSun's gotten on Stockhouse's
Inner Circle site, apparently a branch of Veritas - but you'd never know that without a lot of digging
and a little luck (the obscure disclaimer link doesn't always work).
And yet there's really not much to promote.
Shareholder Hide-and-Seek
Other areas of concern include ZiaSun's trading site, Swiftrade, and its affiliation with Amber
Securities Corporation.
ZiaSun's claims about Swiftrade have been shifting almost since it was launched. At first it was
pitched as the only place to trade on the Hong Kong and New York exchanges from one website.
Now it's being touted as the only site that focuses on overseas investors. Perhaps, but overseas
investors have access to the U.S. exchanges through any number of brokerage firms, not to
mention Internet-only traders like E*Trade. And U.S. investors also have avenues to trade overseas
through their computers.
Swiftrade operates through Amber Securities, which along with its sister company, Amber Capital
Assets Ltd. in Hong Kong, has raised the ire of several investors.
One reader in New Zealand said he was lured into buying ZiaSun stock by an ACA lackey, but
when he wanted to sell those shares a short time later he got the run around. First he was told he
couldn't sell until he physically had control of the stock certificates (which the salesman said could
take three months), even though our reader was assured that the shares were being held in his
name at Amber's offices. The hold up, according to Amber, was the transfer agent, whose name
he would not reveal. Even then, our reader was told that he'd have to sign the certificates over to
Amber's California headquarters before he could sell them on the open market. Fortunately our
friend smelled a scam, threatened action with the SEC and voila! his shares immediately became
accessible.
ZiaSun is an unproven entity that talks big but comes up short on facts and figures.
As always, tread lightly………………………. |
