January 25, 1999
Sponsored by WallStreet Guru
Thanks to the Stock Detective's vigilant readers and a bevy of stock promoters, we're flush with tips about stocks that most people should think twice about before investing. All them may not warrant full Stinky Stock status, although we're sure a few will come from this list. Until they reach that benchmark, Stock Detective wants to warn readers about stocks that may have you seeing "red."
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GIC Global Intertainment Corp.(OTC BB: GGNC) shares soared recently, fueled by a combination of Internet mania and expensive hype. GIC bills itself as a "high technology, Internet, entertainment and marketing company." It operates one site, Cyberbetz, which it claims took in more than $5.3 million in wagers during December 1998. But without financials filed with the SEC it's impossible to verify the numbers. Likewise the company's claim that it will be profitable by the first or second quarter of 1999 and its predictions of a $6 million profit on revenues of $65 million in revenues for the first year is pure speculation without an impartial third party audit of its financial statements.
GIC's concept - Internet gambling and sports bookmaking - places it in a potentially lucrative field. We say potentially because gambling is illegal in the United States, except where regulated, like Atlantic City, Las Vegas and a handful of other states and Indian reservations. Internet gaming has been outlawed in Nevada and a number of other states. Now, computer gamblers generally don't have to worry about the police breaking down their doors and confiscating their Pentiums. But they also have no one to turn to if the "house" doesn't pay off or if they run into other problems, according to David Sorkin, a law professor at the John Marshall Law School in Chicago. GIC, like most other online gaming organizations, operates offshore (its gaming license is from Dominica), making it difficult for U.S. authorities to prosecute, Sorkin said. But that doesn't mean they won't stop trying. In fact, the U.S. Department of Justice has a number of cases pending, including several that have produced guilty pleas. There's also been recent concern from credit card companies who cringe at the thought of paying off gambling debts.
Even though it's outside of the long reach of the law - for now - GIC share price's meteoric rise - from a low of $0.78 on Nov. 27 to a high of $6.25 three days later - should make investors cautious. That was the same day the stock for this Vancouver-based company (ding*ding*) turned its entire 3.5 million share float more than twice. This spike should make investors doubly cautious since it came on the heels of a favorable write up by sister hype publications Superstocks.net and Wall Street Research Group. Wall Street Research received at least 135,000 shares of common stock for the promo, but it's not clear how much Superstocks.net was paid since the disclosure on its site is insufficient and does not comply with SEC guidelines. But the paid promoters aren't the only ones guilty of hype. Press releases generated by GIC have gone so far as to compare it to Amazon.com, claiming it is mimicking the online bookseller's marketing formula and insinuating that it will lead to similar success.
One other tidbit: GIC is placing heavy bets on China as a fat market for its cyber gaming. Last fall the company announced it was poised to open a resort casino in Northern China, not exactly something that's easy to verify. Bricks and mortar aside, the Beijing government has been cracking down on Internet freedoms lately, and any assumption that they'll bless the free flow of money out of the country via modem lines is a risky one indeed.
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Continental Investment Corp.(OTC BB: CICG) is back on the radar. Investors may recall this company from its involvement with WasteMasters in 1998. Well that relationship has cooled somewhat, but it's not severed. In its own right, Continental Investment is barely treading water, but at least one newsletter is telling people to buy, buy, buy. Why? Because Continental apparently owns, through stock and options, more than 25 percent of WasteMasters' 495 million authorized shares, including quite a chunk of the 128 million shares outstanding.
But WasteMasters isn't exactly a high-flying issue these days, trading at less than 50 cents, after peaking almost a year ago just above $3. Still Continental is being touted as a bargain basement back door way of someone gaining control of WasteMasters. The newsletter Stock-of-the-Month, which holds a position in Continental but says it was not paid to promote the company, points to several recent "mysterious" events as clues that something big is about to happen. First, on the same day Continental announced it was filing for protection under Chapter 11 of the U.S. Bankruptcy laws, its stock closed higher after taking a 50 percent plunge. Insiders positioning themselves for a coup, as Stock-of-the-Month suggests, or simply trying to keep their personal assets afloat?
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Engineering Power Systems (OTC BB: EGPSF) drops some pretty big names, but so far there's not much to back up the company's claims that it will be a worldwide power generator. But with two paid promoters, who needs credentials? In November, the company said it would gross $30 million (Canadian) for 1998, and taunts investors with the possibility of $200 million in revenues for 1999. One promoter goes so far as to say that $10 per share would be a modest price for Engineering Power Systems shares by June 2000.
The company is banking on a barge-mounted power plant project in India for this huge influx of cash. But a key to this plan is Engineering Power Systems forming a partnership with CMS Energy Corp. (NYSE: CMS) , which has deep pockets and lots of power plant building know-how. Although Engineering Power Systems said in July that a joint venture had been formed, a CMS Energy official said last week that the deal has not closed.
Meanwhile, at least one firm has been paid to promote Engineering Power Systems. Superstockpick Newsletter t Financial began touting the company in November, around the same time Engineering Power shares briefly spiked twice. Superstockpick was paid, through an affiliate, 50,000 options at an exercise price of $1 and 100,000 options with an exercise price of $2. Also in November, broker dealer Taylor Stuart Financial made the unusual move of initiating coverage on this non-reporting bulletin board stock. Taylor Stuart is a market maker in the stock, and has a consulting and investment banking relationship with Engineering Power Systems. A quick search of the NASD's broker/dealer database shows that Taylor Stuart is the new name of State Street Securities, which carved itself a lucrative deal selling shares of Saf -T- Lok into the market. State Street Securities was fined $30,000 reprimanded and suspended in May 1997 by the NASD. The NASD found that State Street had violated a number of SEC and NASD rules, including record keeping irregularities and using unregistered agents. also has a disciplinary history with the NASD, the details of which were not immediately available.
On top of the paid promotion and lofty promises, Engineering Power Systems does not file with the SEC, again making those impartial, third party audited financials hard to come by.
As always, tread lightly……………………
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Previous Redlight Warnings:
January 11, 1999 - Full Power Group (OTC BB: FPGR), Media X (OTC BB: MXMX), Brunelli International (OTC BB: BRUN)
December 21, 1998 - Mako Capital (OTC BB: MAKO), Jagged Edge Mountain Gear, Inc. (OTC BB: JEMG) ,
December 7, 1998 - Advanced Bodymetrics Corporation (OTC BB: ZABC), Alternative Entertainment (OTC BB: BOYS), Axyn Corporation (OTC BB: AXYN)
November 23, 1998 - World Star Asia, Inc. (OTC BB: WSASD), Wade Cook Financial (OTC BB: WADE)
November 9, 1998 - Search Engine Inc. (OTC BB: WKWG), WebGalaxy (OTC BB: WEBY), Golden Eagle (OTC BB: MINE)
October 26, 1998 - AXYN Corporation (OTC BB: AXYN), Nutek, Inc. (OTC BB: NUTK)
October 12, 1998 - American Technologies Group (OTC BB: ATEG), Sun River Mining Inc. (OTC BB: SUNR), Northport Industries (OTC BB: PESO)
September 28, 1998 - Entertainment Internet Inc. (OTC BB: EINI), Tasty Fries Inc. (OTC BB: TFRY), TLC Temporary and Staffing Services (OTC BB: TLCT)
September 14, 1998 - Amazon Natural Treasures (OTC BB: AZNT), PDC Innovative Industries Inc. (OTC BB: PDCI), PTC Group Inc. (OTC BB: PWRE)
September 4, 1998 - International Industries (OTC BB: ININ), Coregenix Medical Corporation (OTC BB: COGX), SpaceDev Inc. (OTC BB: SPDV)
August 17, 1998 - Key Capital Corporation (OTC BB: KCAP), Eclipse Entertainment Group Inc. (OTC BB: ECLE)
August 3, 1998 - Waverider Communications (OTCBB: WAVC), MPEL Holdings (OCTBB: MPEH)
July 20,1998 - Brush Creek Mining and Development Co. Inc (BCMD), Kanakaris Communications (KANA), Seair Group, Inc. (UFLY)
July 6, 1998 - Quill Industries Inc. (QUIL), Fonix Corporation (FONX), Shopping.com (IBUY)
June 24, 1998 - Rocky Mountain Ginseng (RMGG), Dawson Science Corp. (DWSC), SJI Group (SJIG)
June 15, 1998 - Advance Engine Technologies Inc. (AENG), Aviation Industries Corp. (AVIA), Infocall Communications Corp. (INFE)
June 8, 1998 - Mountain Energy (MTEI), Digitcom Corp. (DGIV), Global Games (GLOW), Veronex Technologies Inc. (VXTK), American Access Technologies (AATK)
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