Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Fairmile Gold -- Ignore unavailable to you. Want to Upgrade?

To: Gordon Shanks who wrote (3526)	4/19/1998 9:28:00 PM
From: bull	Read Replies (1) \| Respond to of 4057

I've been burned by some of his picks too but I don't blame "him".I blame myself for being one of the last one's in and/or not getting out when there was signs of troubled waters ahead.He distributed comprehensive essays for everyone to read on how to play the game and the risk was yours to take.Here is one of his essays I dug up from long ago.I suggest everyone that still blames "him" for their losses to read it again. the Paper Game" <Picture> HOW STOCK IS DISTRIBUTED.... This is the sad tale of small cap stock investing. It is not a world for amateurs. Yet, without the amateur, the insiders and professionals have no one to whom they may unload their stock. Without the retail and amateur investor, there is no game. It's like having only one side show up for a football game or hockey match. More accurately, it is like having a big department store... but with no customers. So, the insiders hire a "stock promoter" to get the word out about this company. The stock promoter works his Rolodex of brokers and excites them. The brokers phone their clients to get them "into" this stock. Along the way, a newsletter editor or two is hired to feature the company and excite his subscribers (read the fine print at the bottom of their newsletters, if they bother to include any disclosure at all). Advertisements touting the company and its prospects are taken in numerous small and/or large financial journals. The company hires a few babes and is off to the investment conferences to drum up interest in their stock. Thus, we have what is called DISTRIBUTION. Shares are distributed from the insiders to the amateur. Continuing the comparison to a department store, the inventory is sold off to the customers. What does the company then do? It prints MORE stock, thus diluting the value of the original stock. This is done through a series of private placements. The PURPOSE of promotion is to dump the "old inventory" on a new wave of EXCITED investors, who are hoping to make a quick buck, and then raise new money through one or more private placements. The retail investor momentum drives up the stock's price, allowing the insiders to dump their shares into the strength of the trading volume and have some extra cash with which to do a private placement at a higher price. Or buy a yacht with the profits... or a new house... etc. Stock promoters are paid in stock options. As the stock "races to the moon," and the promoter is telling YOU what a great company this is, he is cashing in on his options. Small companies can't afford to pay an investor relations person in cash so a good one is paid in stock options. Both the promoter and the company believe that if the promotional guy is any good, he'll jack up the price and both will end up making a few bucks.... unfortunately, that is at YOUR EXPENSE! Later, when the stock heads lower, that same promoter is massaging you with grief, whining about how shortsellers are driving the share values down. Of course, he has dumped his shares by now, as have the insiders and often your own brokerage house, and YES, shorts are active, but ONLY after they are certain that it is safe to short the stock. That means that NO new wave of buying is coming in and you are the one stuck holding the bag. This is called distribution. Ask your broker about it and watch him turn red, green or ashen!