Keystone Energy Services, Inc. (OTCBB: KESE)
I'm clearly too late on this one.... Several readers e-mailed me about The Future Superstock Newsletter's
“November Stock Pick”, which was Keystone Energy Services, Inc. (OTCBB: KESE), which came out on
October 31, 1997. However, I do think that it is a classic example of a “pump and dump” of an otherwise
valueless stock, and worth writing up for that reason alone.
The Future Superstock Newsletter announced KESE as “a Company whose sales and profits will explode
exponentially over the next 3 to 6 months.” and claimed that its “sales force is expected to expand to over 500
representatives during the next 60 days.” “We feel that Keystone Energy could be a MCI or Sprint in the
making.”
But hidden in the “small-print” at the bottom of the report is the statement that “The Future
Superstock was compensated thirty five thousand shares for its public relations services and for the
dissemination of this report.”
Since KESE does not file reports with the Securities & exchange Commission, there is no information available
about the company other than that contained in The Future Superstock write-up itself, and in three press
releases, which were issued once a week, in December. One of these press releases is to announce a
telemarketing campaign, and another announces that KESE has acquired “working interests in producing gas
wells in Louisiana.” This latter release seems to have nothing whatsoever to do with the sale of electricity in
California, which is purportedly the company's strategic focus.
Well anyway, the price of the stock reacted to this promotional effort...and also reacted when the promotional
effort was turned off. KESE is not covered by my charting service, so I am using Yahoo's charts, which only
show from mid-November to the present.
The Future Superstock write-up itself states that “On Friday, October 31st, Keystone Energy
(Ticker: KESE) closed at $5.50 per share.”
As shown by the chart, the stock ran up to $12 in early November, undoubtedly as the result of the
heavy “promotion” efforts.
However, when the promotion efforts ended, the price of KESE fell almost continuously, from
around $10 in mid-November to its current price which is just above $2. Trading volume declined
in concert with the share price.
Today's Wall Street Journal contains an article stating that:
” As California moves to open electricity sales to competition on March 31, some 250 would-be
marketers have signed up in the hope of making a fortune in the state's $20 billion-a-year electric
market. Many are small businesses -- and most are likely to be disappointed.”
The article goes on to state that “ the reality of selling electricity in California is a lot tougher. For
one thing, baseline rates that will be charged by established California utilities, such as PG&E
Corp.'s Pacific Gas & Electric unit and Edison International's Southern California Edison Co. unit,
have already been set. And they are low enough to make it extremely difficult for newcomers to
beat the price and still make a profit.”
The final paragraph reads “Senior assistant attorney general Herschel Elkins says he fears that
electricity deregulation may spawn "massive amounts of misrepresentation" in sales pitches to the
public.”
napeague.com
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Jason's Story
Don't let this happen to you...
Dear Stock Detective:
After my initial feelings of anger subsided, I've come to realize that the only one I can blame is myself.
I've only been investing seriously for less than a year, and I've been doing most of that online through a
discount broker.
I don't have any history or education in how to pick stocks to buy, and I've never known or been able to
afford a good broker to help me. Knowing that I was a novice and not ready to assess the potential of a
stock on my own, I invested based upon word of mouth.
I know, as an educated investor, you probably want to slap me upside the head until I get some sense,
but that's what I did.
I listened to what other people I knew were investing in and the stocks they
talked about. I invested in the ones that sounded good, and this worked
well for me. I bought Microsoft, Darden Restaurants, Amazon.com, and
Reynolds & Reynolds, and they all performed relatively well. The advice I
had received all worked out well, until I started investing in the Future
Superstock's picks.
It was probably greed that burned me more than anything. I was doing OK
with the stocks that everyone was buying, but I wanted to be different. I
didn't want to follow everyone's advice. I wanted to blaze my own trail. I
thought using an on-line discount broker was great, because I could afford
to trade quickly and actively.
However, I had no broker to second-guess me. I bought shares of National
Healthcare Manufacturing Corp. (Nasdaq: NHMCF) right after they made an agreement with Sysco
Foods Distributors. It was holding relatively steady when I bought some Golden Phoenix Minerals
(OTCBB: GPXM) after hearing from Future SuperStock how they had 100% equity interests in
thousands of gold rich acres all over the country.
I knew nothing about either industry. I made rash decisions based solely upon the advice I was getting
from one source over the Internet, but I kept rationalizing my actions. I saw how trading volume went
way up when the Future SuperStock profiled a stock, so I thought they had to be for real. I watched
GPXM gain nearly 50% in just a few weeks, only to fall shortly thereafter.
I thought they were doing me a favor, by giving me these hot leads over the
Internet, before word of them circulated into the general populace. Then I
watched both NHMCF and GPXM move steadily downward, but I convinced
myself this was just a temporary setback. I saw Keystone Energy
(OTCBB: KESE) moving up, and decided to buy some of that, as well. It
had only been three or four months since I started investing in the Future
SuperStock's monthly picks, and I was brimming with optimism. I told
myself it was a temporary slump, and I bought some more GPXM to offset
my losses.
Then the bottom fell out on KESE so quickly, I didn't know what hit me.
Now I'm sitting here with a good deal of GPXM, some of which I bought
while it was about $4 a share, and some at almost $1 a share. Both the
NHMCF and the KESE are worth substantially less than when I bought them. I think I got as burned as
anyone could get on the KESE, buying at $12 7/8 per share. I don't have to tell you what it's worth now.
I never sold because, until yesterday, I always had faith that they would go back up. I suppose I still
hope that they will, because I have yet to sell them. I would really like to know if these are legitimate
businesses, or merely business fronts.
I know that I've whined for quite long enough. Even though I'd like to blame the Future SuperStock, I can
only blame myself.
I hope Stock Detective can save other investors from falling into the hole that I put myself in.
Thanks again,
- Jason Carlisle (jasonc@cobaltgroup.com)
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More often than not, the Stock Detective's editors come across new information or have important
updates to previously published subjects on the Stock Detective web site. Since there's only a few
of us Stock Detectives and so many dirty stock scoundrels, we realized we couldn't possibly
provide a timely, feature length article every time we smelled a potential rat. Unfortunately, we also
felt it was a disservice to not tell our readers all we know or observe, even if there wasn't enough
time to fully investigate every lead.
So therefore, we've launched Stock Detective Light, a new feature to keep investors informed of
news and updates of the Stock Detective kind. Please keep in mind that the information on this
page is not a complete analysis of any company or security and that no investor should make a
decision on the information in this newsletter alone. Also, it's important to note that no person(s),
company(ies) or institution(s) are guilty of any wrongdoing until proven otherwise, hopefully in a court
of law, and - thanks to Stock Detective - before you've been burned.
Stock Detective Light - December 1, 1997...
||||| Keystone Energy, our Stinky Stock feature of November 25, 1997 has generated more response
than any of our previous Stinky Stock features. Most of it has been complimentary to Stock
Detective although a minority have been quite critical. We've even fielded a few calls from parties
accusing Stock Detective of scheming with short sellers to drive the price of Keystone's shares
downward. To make the matter perfectly clear, Stock Detective has no such relationships nor do we
trade in the stocks mentioned therein. Employees of Axxess, Inc., Stock Detective's parent
company are forbidden to trade in the shares of any stock discussed in any of our various
FinancialWeb sites for at least two weeks prior and four weeks after publication.
Nevertheless, we did receive correspondence from Keystone's investor relations representative,
Anita Carlisle of Carlisle Communications, asking for equal time, which we so endeavor to grant
herein:
In response to your article on Keystone Energy Services, Inc., several incorrect statements were
made.
1) Stock Detective reports that a Keystone press release last April stating an alliance with New
Energy Venture never existed.
Keystone and NEV did have a signed marketing services agreement dated March 27, 1996 effective
May 1, 1996. That agreement no longer exists, but it did at the time of the April press release.
2) Stock Detective stated that the aforementioned agreement was news to NEV and that their
attorneys said no such agreement ever existed, and cites Lew Phelps as a spokesman for NEV,
and that no one at NEV has ever heard of Keystone.
I spoke with Jeff Martin, in-house counsel for NEV, and he told (me) that he never said that this
agreement never existed. Lew Phelps said he was the one who never heard of Keystone. Martin said
he had never spoken to Phelps about the issue and said that Phelps is not an employee of
Keystone, but an independent public relations consultant.
3) Stock Detective said there are about 14.7 million shares of Keystone stock outstanding, including
4.7 million in the float. Of the remaining 10 million, 3.5 million restricted shares have been issued to
Keystone officers, and 6.5 million free-trading shares are controlled by shareholders in the old shell.
There are about 14.7 million shares of Keystone stock outstanding, with 4.7 million in the float. Of
the remaining 10 million, 3.5 million restricted shares have been issued to Keystone officers, and
6.5 million restricted shares have been issued to the shareholders of the previous company.
Sincerely,
Anita Carlisle
Carlisle Communications
...Stock Detective responds:
Lew Phelps, who is a spokesman for NEV, told our reporter that he knew of no such agreement
between NEV and Keystone, checked with an attorney for NEV and called back to confirm his
statement. Nowhere does the Stock Detective's article say that no one at NEV had ever heard of
Keystone. Mr. Phelps, although not an employee of NEV, is in a situation similar to Ms. Carlisle's,
and is an independent public relations representative for NEV.
Curiously, if KESE did have an agreement at one time with NEV and has long since canceled that
agreement, why didn't Keystone issue a press release to inform investors of the termination of the
agreement? And why did Future SuperStock publish the news release announcing the agreement -
nearly six months after it was canceled?
Ms. Carlisle herself was the source for the information Stock Detective reported about KESE's stock
distribution. Calls to L. Michael Caldwell, Keystone's CFO, at the company's Los Angeles office,
were not returned. Furthermore, Ms. Carlisle was, and continues to be, unable to explain where the
shares in the float came from. Since the float represents nearly one-third of the company's market
value, Stock Detective believes it is not unreasonable for investors to know how these shares
became part of Keystone's shareholder base.
Ms. Carlisle did say Keystone planned to file information (which would include information pursuant
to the company's share capitalization) with the SEC the week of November 17th.
||||| We found a new pseudo-research web site at SuperStockPick.com. The disclosure makes it
clear that their "stock picks" are bought and paid for even though there are no actual picks posted
on the site yet. If you click on the site's December stock pick, you get a message saying the pick
will be announced on December 10th.
This appears to be a new site trying to emulate the likes of Future SuperStock and others. Suffice it
to say, you can save yourself a trip and, while you're at it, probably do well to simply avoid all stock
sites with the word "Super" in the title.
Tread carefully,
...the Stock Detective
financialweb.com |
