By: argubot3
07 Dec 2005, 12:25 AM EST
Msg. 8595 of 8820
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Pink Sheet Due Diligence Tactics (updated 12/06/05)
First, go to PinkSheets dot com and enter the company ticker.
pinksheets.com
When the listing for the company comes up, click the 'Company Info' tab. Here you will find a wealth of information to begin your search.
ADDRESS:
Take the company address and Google it. Many pinksheet companies operate from 'virtual' offices or post mail boxes. This is a red flag. If the company address is: 123 Main St, Suite 200, Anywhere, FL 0U812, then take that and drop it into Google, followed by the word 'virtual'. Like this:
123 Main St, Suite 200, Anywhere, FL 0U812 virtual
With virtual addresses, Google could return a hundred links that contain the address. Many of these will be other organizations using the same virtual office. Adding 'virtual' at the end of the search usually turns up the company that rents the virtual office services. Then you can supply this link to others, so they can see for themselves.
google.com
whitepages.com
WEBSITE:
Websites can provide a wealth of information. They are so easy to put together that nearly anyone can do it. If the company doesn't have a website, or has a website that has been under construction for weeks, that's a big red flag. Any real business will have a website to inform the public about the company and its' products or services. However, the presence of a website does not necessarily mean you should buy the stock, it just means the company got at least one thing right.
Many websites have an About Us section. Usually it is there you will find details about the company business and sometimes officer bios. Sometimes there will be a section where they will have all of the PRs they've released.
If you have the software to do it, you can save the entire website to your hard drive. If you don't, grab every single detail that may come in handy and paste it into a document for later perusal. You'll want to save any alternate addresses, telephone numbers, names, other companies they do business with, most certainly any investor relations information such as the name, address, and telephone number of the IR firm that the company has hired. You'll even want to make a record of who built the website for the company if that information is available.
Some of these things may seem like useless details, but what if you suspected two companies were being operated by the same people, but you couldn't find any indication of it because the company doesn't file with the SEC? Connections like both companies using the same website development service can provide additional clues. Leave no stone unturned.
Finally, you'll want to do a 'WhoIs' search on the website domain name. Domain name registrations sometimes provide very interesting details to add to your mounting pile of leads. There may be telephone numbers or addresses, names or company names you did not know were associated with the company. If you don't know where to find a 'WhoIs' service, just Google "WhoIs" and you'll find plenty of services. Pick one. Look up the company domain name, ie. scamcoincorporated.com using the service. Sometimes it will come back and tell you which registrar the domain was listed under. So then you go to that registrar's WhoIs service and look up the domain name there.
These should cover about 95% of the look-ups you may need to do:
whois.net
registrar.verisign-grs.com
premiere.register.com
networksolutions.com
godaddy.com
TELEPHONE:
Again, hit Google. Type in 'reverse number lookup' and bookmark the link you find that works best for you. Enter every telephone number you have found associated with the company into the reverse number lookup service. Record all names and addresses in your notes. You can also just enter a telephone number by itself into Google and it is possible you will find other companies using the same telephone number, or links to old PRs, etc. All of these are valuable clues in determining outside connections to the company you are thinking about investing in.
google.com
whitepages.com
E-MAIL ADDRESSES:
This entry is not found on the PinkSheets.com site, I've added it myself. Always Google every e-mail address you find. Sometimes this can reveal the strangest things, like where your CEO went to summer camp when he was a kid.
BUSINESS DESCRIPTION:
It can't hurt to read the business description so you know what you are thinking about throwing your money into. Some people don't even go that far, they just buy the ticker because someone on a message board told them it was a hot stock. But you aren't that foolish or you would not have read this far, so let's press on.
STATE OF INCORPORATION:
Most State's 'Division of Corporations' are operated by the Secretary of State. When seeking corporate records in a given State, look up the Secretary of State's office for that State, then surf for their Division of Corporations or some similarly named agency.
In almost every instance, pinksheet stocks are incorporated in one of three States, Delaware, Nevada, or Florida.
I think Delaware Division of Corporations' web service stinks. Of the three States, it is the least helpful. Delaware protects the names of company officers and provides little information other than the fact that an entity was incorporated through them and a date. Meager as this may be, it can be helpful to know. Those incorporation dates are very revealing sometimes.
state.de.us (Look on the left hand side for 'General Information'. Click it.)
Nevada is a little more helpful, providing more interesting details, and you can do additional searches like 'search by officer name' to see what other companies your subject has been involved with in the past.
esos.state.nv.us
Of the three States, Florida's Division of Corporations has the best, easiest to use, and most informative corporation searching services. It's very slick. Once you learn your way around you'll find you can dig up volumes of information.
sunbiz.org
Remember, as you find new names and addresses associated with the corporation to go back and Google those as well.
OFFICERS:
Google the officers:
google.com
Look them up in the telephone book.
whitepages.com
yellow.com
And this one will give you prior locations and ages free of charge, but is a fee service for detailed info. The fees are reasonable.
find.intelius.com
If you find residential information, Google the city and State to find the county. Just enter into Google, the city name, the State name, followed by the word 'county'. You will see the county name in the listings. Look for a listing for the county website. If it isn't readily apparent, Google the county name followed by the State and it should show up.
Find the link to the tax assessor's website. Search by the addresses you have and the person's name.
Find the link to the county clerk's website. Look up what these people have been up to the past few years. Sometimes you'll find marriage records or name change records that can shed quite a lot of light on the officer.
I would encourage you to NOT ever post personal information obtained from the tax assessor or county clerk's websites on any message board. This is personal information and for YOUR enlightenment. If you find something that other people should know, tell them to do the same search for themselves, and perhaps mention the significance of what you found, ie. I think the CEO of corp A is shacking up with the CEO of corp B, but don't post the 'proof'.
Personal information is personal information. Regardless of what you think of the person, you should never, ever, post personal information on message boards. It is morally wrong, might get you thrown off the message board, and can land you in some legal hot water. If the fact that it is morally wrong isn't enough of a deterrent, hopefully the other two reasons will be.
However, there are some exceptions to this rule. If the person used their home address in an SEC or other public filing, I wouldn't have a problem posting it. If they list a telephone number in a PR or on their website, they made it public, so there is no reason to think they expect privacy. If it's already out there, do what you will, but if you had to dig something out of tax records or county clerk records, don't post it. A prime example of something you should never post, no matter what, is a social security number. Sometimes you'll run across these, which will allow you to do deeper background checks, but under no circumstances should you post them.
OUTSTANDING SHARES:
ESTIMATED MARKET CAP:
CURRENT CAPITAL CHANGE:
DIVIDENDS:
CLASS NOTES:
All of these deal with the share structure and changes in the share structure. Too often the words 'Not Available' will be in most of these slots. That's another huge red flag. Call the Transfer Agent listed further down and inquire about these numbers. If they are 'gagged', meaning the company doesn't want them giving out the details, then you have one of the biggest red flags you'll come across.
COMPANY NOTES:
This lists the names the corporation used to do business as. You should know the company's history and investigate the old names just like you are investigating the current company. Sometimes you'll find connections to shady characters in the past, which may give an indication of what direction the company is currently headed in.
TRANSFER AGENT:
Give the transfer agent a call. Say 'Hi, can you tell me the share structure for (insert ticker here)'. Also note that you can and should do your due diligence searches on the transfer agent as well. Some of them have had legal problems in the past, which can be a big red flag, or you'll find other companies using the same transfer agent (not unusual, after all, they are transfer agents) which may provide additional links between this company and another if you suspect there is something going on.
AUDITORS:
Again, the auditor a company uses can be revealing. It can be another link in the chain of 'coincidental' similarities between companies.
Ok, so that's already a ton of DD from just one page. Now comes the painful part, reading the SEC filings, assuming the company files. PinkSheets.com provides a tab that reads 'SEC Filings'. Click that for a list. Remember that these are only filings for the particular company you are looking up. For the real meat you have to go to the SEC website itself and start poking around there.
sec.gov
sec.gov
Not only do you want to look up the company itself, but you want to look up the officer's names to find other companies they are associated with, as well as the former names of the company, and any other names associated with the company.
These searches only scan the filing headers for matches. If you really want to know what is going on you have to read each filing and make notes of all the interesting things you read.
On a final note, I'll point out that you need to share your information with others. If you find dubious connections or unusual activities, let everyone know about it. I'll mention once again that you do not want to post personal information, but you can let others know the information is there to be found. The only protection you have from being scammed is information. The better informed you are, the better decisions you can make when contemplating stock purchases. If only one person did just the DD listed above and posted their findings, everyone would benefit. If others do it, you will benefit.
Sometime in the near future I'll go into more detail about following leads from SEC filings, more about what you can find on company websites, and other fun stuff.
Leave no stone unturned.
DISCLAIMER: This document is not intended to imply or suggest there is anything amiss with any particular company, regardless of where it is posted. It has been written, and will continue to be modified as needed, for the use and protection of investors and traders.
"Give a man a fish and he eats for a day, teach a man to fish and he eats for a lifetime." |
