To: Steven Finkel (1012 )
From: Rande Is
Tuesday, Mar 9 1999 8:56AM ET
Reply # of 1223
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 catagorically 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 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 livelyhood.
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 eveyone 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.
Rande Is |
