Found this on the Raging Bull. Nice read and something to think about.
By: Penguin
Reply To #3555 by Penguin
Saturday, 13 Mar 1999 at 4:04 PM EST
Post # of 3565
A better formated version to bookmark:
==================================================================
THE BASICS . . . . . BEFORE YOU BUY AN OTC PENNY STOCK. . . .
There are several key areas to look at when doing DD on an Over-the-counter penny stock.
And it doesn't even include looking at the financial information . . . . that is the least important
thing to look at.
Share structure and distribution is the FIRST place our eyes should go when looking at an
OTC stock. Don't even READ the news until you know whether or not 5 million shares were
sold at .005 to a company in the Cayman Islands.
If so, you can rest assured that there will be heavy selling on any run up, as each new buy is
met with an insider sell. And the stock will probably then get heavily shorted near the top . . .
and driven down to nothing . . . and I do mean NOTHING.
And if the company does not report their financials to the SEC . . . . RUN AWAY. Don't even
consider them, because they will surely rip you off any way that they can. And if they SAY that
they will soon be reporting their "audited" financials . . . run even faster . . . this means they
have NO INTENTION of filing with the SEC. And even if they say "we will be filing with the
SEC" or even "we HAVE submitted our financials to the SEC." DON'T BELIEVE THEM.
MDCE put out a half dozen press releases telling shareholders that they filed their financials
with the SEC . . . but somehow . . . as if by magic . . . they have never appeared on the
Edgars.
This stuff is the BASICS of penny trading.
SECOND, look at the HISTORY of the stock . . . was there a reverse split or reverse merger
in its past? If so, there will probably be more problems or more reverse splits in the future.
How long has the company been in business? It is one thing for a company to come up with
an idea . . . it is CLEARLY another for same company to figure out a way to successfully
market that product or service . . . and it is another thing yet, for the company to properly
manage their money.
Take down the names of the officers of the companies, the investor relations people or firm
and any other important parties . . . and do a "entire website" search at the SEC. This is not
an Edgar search . . . and can be found on the main page of the SEC, which EVERY penny
trader should know very well. If your party comes up in the search, you can know their history .
. . if not, it does not mean they are "clear" . . . they still could be under investigation or have
played a smaller role in other scams, etc . . . . or just have never been caught. Be UN-trusting
as a defense to loss and you will increase your chance at gains.
The easy way to do searches on SEC is to use "adj" between names like John Smith . .
."john adj smith" . . . if it is an odd last name, it should be fine by itself . . "stephanapolous" or
"gianapolitana" or "santodominguez" etc . . . otherwise use adj on firm names like "La Jolla
adj Capital" or "La adj Jolla adj Capital" . . . this will keep the thousands of uses of "capital"
or the city "La Jolla" from coming up in the search. It means literally "adjacent" words.
THIRD, read the press releases with a cynical eye . . . if they say that the industry is reported
to generate 14 billion in revenues each year and we estimate that our revenues in the
coming year will be between 40 million and 60 million dollars . . . . RUN away.
If there is no LOGICAL and detailed explanation of HOW the company plans to make ANY
money . . .then they don't . . . they just plan to sell shares . . . to you? . . . hopefully NO . . . to
the suckers that don't have a clue what they are doing. ANY reports of "projected" revenues
should be based on PRIOR performance . . . if not, it is just a pie-in-the-sky arbitrary number
picked out to make them look good to prospective penny traders.
If the company headquarters is in Vancouver, Boca Raton, La Jolla, Denver or Las Vegas . .
. . RUN AWAY. There is an old saying in the record biz, where thousands of demo tapes are
sent every week . . . "if we reject 100 percent of those wanting a record deal, we will be
correct in our decision 99 percent of the time . . . and that ain't bad"
By categorically denying ANY company hailing from these cities, thus rejecting 100 percent
of them . . . we will be correct in our decision 99 percent of the time. And that is not bad.
Other suspect cities, which would require EXTENSIVE DD to justify, include New York City,
Dallas, Houston, Palm Springs or other cities of the Coachella Valley, Ft. Lauderdale, Lake
Mary or other cities in South Florida, any city in Nevada, ANY city in Canada where everyone
can short-sell penny stocks, any other "resort" city.
If Gucci has a store there . . . then chances are your company does not operate a 50,000
square foot building in the same town . . . but rather is just one of many operations out of a
small office there.
FOURTH . . . INVESTIGATE . . . A good way to find out about the company? CALL THEM.
NO, I don't mean to call the number they provide you . . . I mean call the local area directory
assistance and ask for the company name . . . I have even gone as far as asked for the
numbers of each of the officers of suspect companies, only to find that NOBODY had a listed
number . . not even the company.
If the company has an unlisted number . . . think about it . . . their customers or clients will not
be able to find them . . . they are absolutely bogus. If the CEO or his wife answers . . . or
there is a baby crying in the background . . . guess what? The company is being run out of
the kitchen table of a house, and they want your money . . .why? There are bills that need
paid, that's why.
Another good trick, is to offer to visit the company headquarters on short notice . . . say
something like I will be in town first thing in the morning and would like directions to the
company headquarters, so you can report back to your thread on Silicon Investor . . . yes
they all read our threads.
If they say the company is moving, under construction or give ANY reason whatsoever for not
allowing you there . . . you have your answer . . they are bogus . . don't believe them . . . if they
offer to meet you elsewhere or to guide you in . . . decline and say, you may be late and insist
on getting precise directions to the company headquarters. You will be amazed at the
number of companies that will refuse to tell you.
If you are still interested in the company at this point . . .then you must ask yourself how much
you are willing to lose . . . if you are "investing" 2,000 or more dollars, then go to Southwest
Airlines website on a Tuesday thru Thursday and book a 33 to 99 dollar "internet special"
flight there and go and see them for yourself. For just a same day trip. . or overnight if you
feel adventurous . . . for just a few hundred bucks . . you can get a first hand account of where
your money is going.
If they sell goods . . .you want to see the warehouse, shipping, receiving department . . .it
should be impressive . . . even if it is tiny . . . if they sell services . . . you want to see the
laborers performing these services . . . if the company is nothing more than a small office
with no laborers, because they "farm out" or their workers work "out of their homes" . . . RUN
away. That is a lie . . . the company is in business just to sell shares. In which case, be sure
to note the leather interior of the CEO's car . . .because that is what your 2,000 bucks
bought.
Note the name or names on the door. Instead of the company name, does it say "capital . . .
equity . . . investor . . . relations . . . financial" . . . etc??? Do you know why? Because they
operate NUMEROUS companies from the same office . . . in which case, your presence is
not only NOT WANTED . . . . it is threatening to their livelihood.
If that is the case, I would not bother to even enter, as it may be a potentially dangerous or
threatening situation . . . I would turn around and never look back.
But here is the part of penny trading that is the most important of all . . . and what I expect
from each of us here on the fishing thread . . . when you have information about these
companies like that described above . . . and someone else is getting suckered into the
same company . . . have the decency to tell them.
You don't need to go on the thread and tell everyone they are invested in a bogus company .
. .chances are good that they have already figured that out . . . but in the course of daily
discussion, when the name pops up . . . and you can shed some light . . . do not hold back.
If they were unlisted . . . say so . . . if they have convertible debentures from an offshore
placement. . . say so . . . if there was a 1 for 100 reverse split a year ago . . . say so . . . etc
etc, etc.
Not every company on the OTC or the Nasdaq is bogus . . . . but as I said on the Scammy
Awards:
Welcome to the Over-The-Counter market of Electronic Bulletin Board and Pink Sheet
stocks.
Out of 100,000 issues,
90,000 are scammys
9,000 are clueless
900 are really trying
Leaving 100 that are worth buying
(Voluntary Disclosure: ST Rating- strong sell; LT Rating- strong sell) |
