VALDE CONNECTIONS, INC. (OTCBB: VLDE) PART I – JUST STYLING
April 21, 2003
stockpatrol.com
It has been one of the most aggressive promotions of the year. Since mid February 2003, promoters have been touting an obscure company called Valde Connections, Inc. (OTCBB: VLDE) with unrelenting vigor. Financial newsletters, bearing names like Pot of Gold, Over and Under, New Horizon, Mustang Stock Picks, Lightening Picks, Golden Goose Picks, Gladiator Picks, Crystal Comet, Cat’s Meow, Bulletin Board Stock Picks, Blue Ribbon, Benchmark Stocks, Gold Bar Picks, All American Stocks, Smart Stocks, Precious Gems, TNT Picks and Top Drawer Stocks – to name a few – have been aggressively imploring investors to buy shares of the fledgling startup company.
Who was sending the newsletters? The actual individuals orchestrating the onslaught did not identify themselves or say where they could be contacted. Apparently they were standing behind their recommendations – far behind.
There is no sign that Valde is involved in the shameless promotion – or that it is even aware of the campaign – but someone has been paying these “newsletters” to distribute e-mails recommending the Valde investment.
Is the hype justified? We decided to compare the promoters’ enthusiasm with the Company’s performance.
That’s A Cut
Until January 20, 2003, the Company – then called JDLPhotos.com, Inc. – sold matted and framed photographs at art shows and over the Internet. The Company’s revenues were modest; gross profits were approximately $69,000 for 2002, with net losses of over $73,000.
In January the Company decided to jettison the photo business (transferring the operations to a former controlling shareholder), changed its name to Valde Connections, and embarked on a new venture – the hair salon, spa and modeling business. Control of the Company was transferred to Stephen Carnes, who received 984,760 shares of the Company’s common stock, and Valdemar Castro, who was issued 95,240 shares.
The Company wasted little time before increasing those holdings. On January 27th the Company, whose sole director now was Mr. Carnes, declared a 20-for-1 stock dividend for all shareholders of record as of January 24th. That included the new management team, which had acquired its shares on January 20th.
The Company’s public filings provide few details about the two men who are now running Valde Connections. The Company’s website (www.valdeconnections.com) provides the barest information, describing Mr. Castro, known as Valde, as an award winning hairstylist, and Mr. Carnes as a “successful entrepreneur” with years of experience.
The Company’s bold new business plan contemplates the operation of “multiple storefront locations” that offer hair salon and day spa services coupled with a modeling and talent agency. At present, the Company does not operate any salons or own a modeling agency. Needless to say, each venture presents significant obstacles, including the need for considerable capital and appropriate personnel. At present, it is not clear whether Valde Connections has any cash available, or any employees other than Messrs. Carnes and Castro. A Form 10-K for the year ended December 31, 2002, filed on March 28, 2003, conceded that the Company will need additional funding just to “to establish its corporate organization and infrastructure” and to complete its “business plan to address the hair salon, spa and modeling industries.” That does not even address the considerable funds that will be necessary before any operations become viable.
Such concerns have not dissuaded the bevy of well-compensated promoters.
A Model Promotion
E-mails promoting Valde as an “excellent buy” began to arrive in early February. The first wave simply introduced Valde Connections, and the prospect of a thriving salon/modeling venture. Although the newsletters purported to be from a variety of senders, they contained virtually the same content, a rose-colored view of a start-up business.
The February 20th newsletter was typical. The senders – Mustang Stock Picks, Crystal Comet, Blue Ribbon, and others of their ilk – began by predicting that Valde “may be every bit as good, possibly better,” than API Electronics, which had enjoyed a boost in share prices in January 2003. They did not mention, however, that API might be distinguished from Valde in two critical respects; API had an operating business, and reported substantial revenues.
Despite the qualified prediction that Valde “may be” the next API, the newsletters provided little useful information. Instead, they proclaimed, in bold red print
There are very strong rumors circulating that VLDE may have very good news in the near future. And if so, we will report that news. We do not know what it is. But we suspect it might be something that will greatly influence the price northwards. One must simply conclude that this Company is surely not standing still. Make your choice.
In other words, we know nothing, but we believe stock prices will increase. Make your choice? Based upon what?
The newsletters went on to characterize Valde as an “excellent buy” at deflated prices, audaciously predicting a short term share price of $1.25 and a long term price of $3.10. At the time, Valde Connections shares were selling for approximately 25 cents.
In an effort to support that recommendation and entice investors, the promoters explained that “beauty” is a recession resistant business, that “never goes out of style,” going so far as to point out that the hair salon and day spa business purportedly “took in an amazing total of $145 Billion” in 2001. And, they noted, Valde would be developing a modeling agency as well.
But Valde Connections had no business, so the general success of the hair styling industry and the seductive lure of modeling offered absolutely no clue about the Company’s potential for success. Still, the newsletters called Valde Connections “an excellent ground floor opportunity,” and urged readers to give serious consideration to the Company “before the masses do,” citing a “competitor,” Regis Corp., that recorded $2.3 billion in sales last year – without any day spa or modeling operations.
Of course, Valde Connections is not actually in competition with Regis, any established day spa, any revenue producing modeling agency, or any other operating entity. Valde is just getting started.
And then, in a further flight of fantasy, the newsletters concocted the following series of “cross-over marketing opportunities,” for Valde Connections - a fanciful list of “what ifs:”
• “What if the Company were to have a model search and they conducted said search with a co-sponsor like say a TV or Radio station (or both). …Girls, parents and friends end up becoming clients of the salon because the girl happened to enter the model search contest.”
• “What if the company were to hold a style/model show…at the wine bar one evening and what if this were a very exclusive event to attend.....this would make the wine bar very popular for people who want to attend such an event….[In addition] the wine bar could become a good profit center…”
• “Just how much revenue and profits might the company make” from modeling contracts.”
• “What about retail? The company mentions in one line on the website that it hopes to develop a retail line of beauty products. That is a HUGE industry. Consider after the company has stores/shops throughout the US, ponder the profits it could generate from retailing its own line of consumer beauty products.”
It all sounds a bit like “Andy Hardy” – as in “I’ve got a barn, let’s put on a show.” Such hypothetical “business developments” may make for interesting cocktail party chatter, but they offer no meaningful insight into the viability of Valde Connections.
But the newsletters had just begun to arrive. The next wave of e-mails would make some audacious predictions, and raise some troubling questions. We will look at that, and more, in Part II of this series.
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