Pink Monkey was on the list. That was one of the first calls made on this thread.
To:Anthony@Pacific who wrote (114)
From: HiSpeed Thursday, Dec 3, 1998 1:55 AM
View Replies (2) | Respond to of 67600
PMKY (closed @ 13.500) : SHORT!!!!
Briefing.com did some MINT DD on this company- if it opens above ooohhhh, say 2, short
the $%^& out of it. Cover between 0 - 1/4 ;-)
From Briefing.com:
Updated 03-Dec-98
PinkMonkey: Doing the Homework
One of the hottest stocks over the past three days has been PinkMonkey.com (PMKY).
Know anything about it?
We doubt it. In fact, Briefing is convinced that everyone who traded in PinkMonkey.com
(PMKY) did so without any clue about the real status of the company.
Briefing knows this is true because we tried, with great difficulty, and until we got a chance
to talk directly with the President of the company, everything we could find only raised
additional questions.
Action in PMKY Since Monday Noon
First a little history of what went on this week.
Prior to Monday, PMKY was a completely unknown stock. Just 100 shares traded on
Friday, November 27, at $1 1/16. That's a total dollar volume of $106.
Then at noon on Monday, PMKY issued a press release entitled "Pinkmonkey.com Poised to
Become the Amazon.com of the Educational Study Aid Market." The company intends to
distribute Cliff Notes style "cheat sheets" to students over the internet. For $2.95, a student
can order the notes at 1:00 AM and get that paper done by morning. It is a cool sounding
idea, and traders, like dogs chasing sausages on a string, went for it.
Volume on Monday was 101,100 shares; the price closed at $3 5/8. Approximate dollar
volume: $300,000.
On Tuesday, the volume was 381,600, closing at $10. Dollar volume: Almost $4 million.
Yesterday, volume was 553,400, closing at $13.50. Dollar volume: probably over $10 million,
as the high was $17.
Incredible action, especially considering that, except for people who were holding before
Monday, not one of these traders could have known anything substantial about the company.
Difficult Research
First of all, try looking up anything at all about this company.
The company has non-filing status with the SEC, meaning it has less than 500 shareholders,
and less than $10 million in assets. Non-filing status is legal, but it makes it hard to find out
critical data about the company.
Nevertheless, we made the effort.
Briefing's Research Trail
First, we started with Briefing's Powersearch tool (for subscribers), which allows us to look
up every Press Release and Business Wire for the symbol PMKY. This gave us three
responses.
The oldest press release, dated September 9, listed a Liberty, Texas phone number for the
company, along with the name Pat Greene, who we later learned is President of
PinkMonkey. We called the number all day. No answer. No voicemail. We called Liberty
Texas information. No listing for "PinkMonkey" in the entire 409 area code.
Next, we called the public relations firm, Merger Communications, which put out the
Monday press release that started it all. There we talked to David Drake, who after asking us
some questions about who Briefing is, decided to answer our questions.
First question "How many shares are there outstanding for PinkMonkey.com?" Answer: 14.2
million.
Second question "What's the float?" Answer: 370,000 shares.
Third question "What's the revenue of the company and can we get a balance sheet to look
at?" Answer "I'll have to get someone from the company to get back to you on that."
As an individual investor, we would have stopped right here. At 14.2 million shares
outstanding, PinkMonkey has a total market capitalization of nearly $200 million dollars.
Considering that the entire market for Cliff Notes style "Study Aids" is $400 million,
according to PinkMonkey's own press release, that seems a little rich. But we didn't stop and
when we pressed for more information, Merger Communications sent us a "fact sheet" on
the company.
The fact sheet, apart from telling us how many students there are in the US, gave us the
following information.
•PMKY became a public company in June after a "merger" with North American National
Resources (BB:NANR) a Nevada Company. •The company considers itself a "virtual"
company, and has "no formal facilities." •PinkMonkey has a "small number of full time
employees" but does not list how many. •"Low level programming" is done by a company in
India named Meena Exports. •The company is registered in Nevada, but lists Liberty, Texas
as the company headquarters. No address is given.
After searching for information about stock symbol NANR, we found that the merger was a
"reverse merger" where the public company is the one that actually issued the shares to
acquire PinkMonkey-Texas, as it was then called. The new company then renamed itself
PinkMonkey.com and the stock symbol changed to PMKY. All research on "North American
National Resources" came up empty, except that a total of 700 shares changed hands in the
past three years in only three separate trades.
Houston InterWeb Design
The third press release was particularly puzzling. A company called Houston InterWeb
Design, Inc. issued a release on November 30, just four hours before the PinkMonkey
release. This release states that Houston InterWeb plans to give shareholders of
PinkMonkey.com shares in Houston InterWeb, for nothing! Certainly puzzling.
Briefing called Houston InterWeb, where none of the principals took our call. Nevertheless,
we did learn that Houston designed, and maintains the PinkMonkey.com website and that
Harry White, President of Houston InterWeb, sits on the board of PinkMonkey. Also, the
receptionist said, "Mr. Greene uses an office here occasionally."
Why in the world would a web development company issue stock to a company which
presumably should be paying it? Does Houston InterWeb own any PinkMonkey stock?
So we looked up Houston InterWeb's SB-2 filing with the SEC, which registers their shares
for public sale.
Here are three gems straight out of this prospectus.
•"In September 1998, the company issued 750,000 shares of common stock to
PinkMonkey.com in consideration for $10 and PinkMonkey.com agreeing to distribute the
750,000 shares to PinkMonkey.com shareholders. Additionally, the company agreed to file a
registration statement with the SEC registering the common stock distributed to
PinkMonkey.com shareholders. Harry L. White, a director of PinkMonkey.com, was issued
a warrant to purchase 100,000 shares of PinkMonkey.com common stock at an exercise
price of $.625 per share in consideration for services rendered. Mr. Magness purchased
70,000 shares of PinkMonkey.com common stock at an aggregate purchase price of
$35,000. " •"The resale of 252,633 shares of common stock, along with the distribution of
750,000 shares of company common stock to PinkMonkey.com shareholders will be eligible
for immediate resale in the public market. Substantially all of the remaining 15,279,000 shares
of common stock outstanding will be subject to resale pursuant to the provisions of Rule
144, 90 days after the date of this prospectus. " •"Net cash used in the operation of the
company's business was $275 for the period from inception (August 9, 1996) to July 31,
1997 and net cash provided by operating activities was $3,169 for the year ended July 31,
1998."
Item three shows you that Houston InterWeb Design stock is basically worthless. What is
behind this unusual deal? Are principals of Houston InterWeb also shareholders of
PinkMonkey? Why did PinkMonkey give Harry White stock at $0.625 a share? Has he
exercised those warrants? We can't tell, and no one at Houston InterWeb returned our calls.
Frankly, it left us very confused.
That's about all that any individual investor could possibly learn on their own.
Conversation with PinkMonkey President
At this point, we were about to quit, when, at 9:00 PM EST, we called the PinkMonkey
number again and Pat Greene answered. Finally, we got to ask some basic questions that
anyone should know about any stock. But with PinkMonkey, you can only get them directly
from the President.
First of all, we learned about North American National Resources. Mr. Greene explained it
was a bankrupt oil company, which PinkMonkey merged with in order to become public, the
so-called "shell company route" to becoming public. The float in PinkMonkey, the 370,000
shares, are (were?) shares owned by the previous owners of NANR. (How many of them
still hold shares, do you think?) "They're probably pretty happy today" he admitted.
Second, we asked about revenue. "Well, we had a real good day, yesterday," he said. "We
sold ten books." That's $30. Thirty dollars.
Next, how much cash do you have? About $500,000 was the answer (that's $0.04 per
share). But they are looking for substantial investment via private placement.
How many employees? "They're mostly part-time people" Mr. Greene said, referring to the
writers of the cheat-sheet books.
Then we asked about the relationship with Houston InterWeb. Why would they give you
stock for free? And why would you give them cheap stock? Mr. Greene responded, "Well
first of all, they are good friends of mine." Then he stated "We plan to spin them off and its a
real good deal for PinkMonkey shareholders."
In other words, expect PinkMonkey to acquire Houston InterWeb Design and spin-it-off as
an independent company at some point. And PinkMonkey shareholders will have Houston
InterWeb shares that they can sell without ever filing a Form 144. That's Briefing's
interpretation, anyways.
Finally, we asked what he thought of the recent action in his stock. "I certainly didn't expect
it," he said. Then he expounded. "No one should invest a nickle into this company until he
has researched it and understands the risk and the reward. There's a lot of risk in this
company."
While we agree with that statement, how exactly is someone supposed to research the
company? It was particularly difficult for Briefing to get the little information we did, and it is
far more than most people could get. How many people can Mr. Greene actually talk to?
Briefing's Summary
When you step back and look at PinkMonkey from a distance here's what you get.
•No readily available data of any kind on the company's financial situation. •A reverse merger
with a shell company is how the company became public. Perfectly legal, but it's a red flag
demanding further research. Check out the history of Electro-Optical Systems (EOSC) for
why. •The stock price ($13.50) values the company at $190 million dollars. (But don't
worry, revenues were $30 yesterday. They might double today!) •Nevertheless, daytraders
rushed into this stock with gusto, some of whom are no doubt boasting about their
investment prowess at this very moment. Today, the average trade size was 686 shares, or
about $9,000 per trade.
Briefing finds it particularly disturbing that the entire float of this company has now changed
hands almost three times in the past three days, yet we are probably the only ones, prior to
this Brief, who knows anything at all about the company.
Daytraders may not care, but the smart ones refuse to hold any stock overnight. Other
investors who want a piece of the next Amazon.com haven't got a clue what they really own.
But then, how many owners of Amazon.com really know, either?
But why should Briefing be surprised? After all, PinkMonkey's entire business plan is based
on taking money from people who don't feel like doing the real homework. |
