I think you have hit on some very credible points and here is my take on it.
Firstly, from my observations, the majority of the posts on these threads are clearly not statements of facts or discussions as to merits, industry trends, competition, regulations, etc. If you look at the posts some are social, which is fine, some are rahh, rah, rah go stock, then there are the negatives that are down stock down, and some are made to influence up, some made to influence down, well let's say you have a large cross section, but for the most part they are not factual or discussion sharing with positive information, in the sense well never mind, I'll discuss that one with you in private.
Problem one: Promoters
Guilt just by the name. Reputable companies don't hire promoters, they hire public relations firms.
Public Relations firms are paid every month by "check."
Promoters are paid in stock, warrants, brown bags, etc.
A P.R. firm is a long-time ally of the company and does not benefit by the stock movement (i believe that would be a conflict of interest). The P.R. firms job is not to influence the stock but to get the word out and create a following for the company. This means going and sitting down with institutional buyers, analysts, pension fund managers, etc. to try to create interest. These meetings take place at analyst conferences, due diligence meetings, trade shows, dog and pony shows, etc. (not on message boards). The P.R. firm is a long-term player and is compensated with a monthly check for his services and expenses. These fees range from anywhere from $3,000 per month and up depending on the amount of services to be performed and a whole lot of other variables. If you look at "reputable" companies you will see the same names of the PR firms over and over. These firms have usually been around for some time because they are very selective of their clients and usually do not want to be associated with the "trash", it tarnishes their reputation to be associated with it. Does it happen, absolutely, but 1 out of 20, not 19 out of 20.
Now let's talk about a promoter. He is 90% of the time, paid in stock. Conflict of interest, big time. Why is he paid in stock, usually because the company does not have the money to pay him. Are they paid $3,000 per month in stock, I think not. The typical PR firm is paid handsomely. Easily going into the six figures and sometimes incredibly enough even more. Now why would a large exchange listed company pay a few thousand dollars a month and small bulletin board companies pay six figures? Answer simple. There mission is to create enough hype so that either one of the following happens. Enough excitement is created (by legal or illegal means) which causes the stock to go up, so insiders can get out (which is illegal regardless of whether they are reporting or not) the insiders even though part of a non reporting company are construed as manipulating the market for their own benefit if they are paying somebody with the same stock that they are attempting to liquidate. Secondly, promoters hype stocks and create press release factories when the company is trying to raise money. This was the problem with Reg S. Companies would hire PR firms, get the market going, create volume and liquidity, then comes the Reg S player who sees he can buy the stock from the company and feed it back into the market. The company has accomplished its goal of raising money, the promoter who was paid in stock accomplished his goal by liquidating and now moves on, and so goes the story. What has come from this fiasco.
The regulators heard and saw.
1. They changed Reg S to a one year hold from 40 days.
2. Under Securities law Rule 17b a promoter MUST disclose his total compensation to the public. Do they do this no. That is why recently their have been a rash of arrests and convictions to drive home the point.
How will they stop the last abuses, by making all public companies fully report. This puts everything out there in the open for all to see and not invest in the blind and believe that some god in the company is going to carry them home.
The new rules for companies to all be fully reporting is in the comment stage and my best guess is by next year it should be in place.
Getting back to what you were saying, it is difficult to decipher what peoples agendas are, as many have questioned mine. There is obviously the first amendment which we are all entitled to, if we do not like what we hear we have the right to respond or leave. But intelligent people have one thing that levels the playing field, the ability to think and reason. It doesn't matter if people are paid to hype or people are slamming because they are short, people have to complete their own investigations. I have always said the threads should be like the company on trial. If any of you have sat on a jury, then what are the rules. You look, listen, do not form any opinions until all of the evidence is presented and then make your own decisions. Here are the differences though. Credibility of the messengers, the motives of the messengers, etc. So what should investors do, investigate. Sit here, read the threads, read what everybody has to say and then confirm the information. How do we do that, check the evidence. See the evidence, touch it. There is documentary proof, their is circumstantial evidence. If there is a point of view and a counter point of view, see what backs up their statements, and make your own judgement.
People need to understand that a Press Release is not proof positive of what really has happened. As I have pointed out and will give an example most Press Releases are deliquent in their disclosure, not merely on Safe Harbor Disclosure but on the facts. And if an investment decision is made on that basis the company can be held liable regardless of the Safe Harbor Provisions.
Example: ABC Corporation announce it has signed a distribution deal with XYZ Corporation for $100 million, whereby XYZ will distribute ABC's product over the next ten years.
It doesn't tell you:
1. What happens if XYZ doesn't sell the product
2. It doesn't tell you the terms and conditions
3. It is a mathematical equation with variables missing so you can not solve the problem.
In the case of a fully reporting company you would have the ability to view the contract since if it is material, it would be submitted on a Form 8k with the SEC, then you can see the merits or lack there of in the contract.
Also, Press releases again are not gospel. Read and think, is it logical, does it make sense. It is not a contract between 2 parties, it is a statement made by the company. When there are contracts are they with substantial individuals or groups that are capable of performing on the contracts.
Anyway, I have gotten astray. The point is there are rules and regulations and each individual needs to sort out the facts for themselves. Whether biased or not, motivated or not, everyone needs to make their own evaluations. And yes their are promoters on these sites, as well as short sellers, as well as buyers, as well as others representing other message boards and sites. That is what creates the forum. Some try to influence in one direction, others in the other direction, the motive of the long players is to see the stock go up, the motive of the short players is to see the stock go down, the motive of some is to get you to visit their web site and yes there are those that are here for intelligent conversation and ultimately from what I see controversy and intrigue. Everyone is entitled to their opinions, whether they are statements of fact or just beliefs. That is for you to decipher. You are not way off base with your thinking. Can you force people to disclose their identities and motives absolutely not. That's why this is America (I know you can log onto these boards from other countries to).
The only thing that scares me is that people go on blind faith and buy stocks based upon posts on a thread from non-professionals. And in many cases do not have the experience to make these kind of investments and are not prepared to lose their entire investment. Many here know the risks of investing in risk oriented stocks and understand that you may lose your entire investment. But it is troubling to see people contact me and tell me they have either invested their retirement money, college money, or can not afford to sustain a loss. It is mind boggling.
In such cases, some responsibility needs to be placed on investment professionals. At my firm, if you want to buy a penny stock, even if it is unsolicited, the broker will ask you are you aware of the risks, are you prepared to lose your entire investment and what is your suitability to make this investment. The broker then if he feels the client is not suitable (based upon specific standards) will not allow the execution of the trade. Example: John Smith is retired and living on Social Security of $300 per month and has $10,000 in the bank and wants to invest the whole $10,000 in DGIV or MSFT for that matter, he will not let him make the investment. All industry professionals should be that responsible.. Never mind, I could go on for days.
Will you ever see balanced presentation on these forums, no because people become emotional when they make investments as opposed to thinking with a clear head and applying "reasonable man" standards.
Have a good one. |
