EXTRA, EXTRA, NTOY makes stockdetective stinky stock list EXTRA!! I told that guy it was crap today, hope he is listening.
March 29, 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 inevitably will come from this list. Until they reach that benchmark, Stock Detective wants to warn readers about stocks that should have you seeing "red." What sets them apart? Take your pick: volatility, high volume, wild price swings, outrageous claims, a stack of vacuous press releases, or maybe a share price that doesn't seem to add up from the sum of the company's parts.
As always, tread lightly…
Netoy.com (OTC BB: NTOY) has been hawking the site's March 29 grand opening as a can't-miss event. But a curious thing happened as the big day approached; Netoy.com seemed to have fewer and fewer things to sell.
On March 22, Netoy.com's home page flaunted Teletubbies, Barney and Legos. But by week's end, those toy world icons had disappeared.
Perhaps that's a good thing, since Netoy.com didn't have permission to sell or even display those trademarked items to begin with.
According to Lyric Studios, the parent company to Barney's producers, there was no license agreement. "They're using our trademarks and artwork without our permission," said Kelly Lane, a spokeswoman for Lyric Studios. "The legal department will be contacting them."
Same for Itsy Bitsy Entertainment Co., which grants permission to use the Teletubbies' likeness. Ditto the parent company of Legos (which said only eToys is licensed to sell the snap-together blocks online).
Toy giants Hasbro and Mattel also said Netoy.com was not a customer, and Mattel's legal department said it would investigate to determine if there had been any copyright infringement.
Michael Maus, vice president of Netoy.com, said the disappearance of Barney, Teletubbies and Lego was mere coincidence, and that Netoy.com had not been contacted by any manufacturer asking that trademarked images be removed.
Even without those products, Maus said, the fledgling company isn't worried about the now-dominant eToys.com.
"We've got a better stock symbol than they have," Maus quipped. "We're not worried about them. There's plenty of room in the market for everyone."
Netoy.com began trading on the over-the-counter bulletin board March 15 after completing a reverse merger into an empty shell and a 1-for-10 reverse stock split. Of the 7.8 million shares outstanding, 1.7 million are in the float and the rest are restricted under Rule 144. The original shell owners received 270,000 shares of stock, Maus said. Netoy.com also raised $1 million through a private placement, under SEC Rule 504.
Netoy.com is non-reporting to the SEC, and without those documents, the company's financial situation is unknown. Its inventory is worth "several hundred thousand dollars," according to Maus, with a substantial portion in collectibles, which Netoy.com plans to develop as a niche market.
Netoy.com will be riding the coattails of eToys, which is expected to launch its IPO in mid-April. Maus made no bones about enjoying some of the hype that eToys should generate for other online merchants.
But it might make it tougher to compete. EToys, now the largest online toy retailer, expects to raise about $115 million through its IPO.
Netoy.com's gotten a jump on the publicity bandwagon by hiring Fortune Marketing & Capital Consultants Inc., which in turn has paid Small Cap Journal $4,000 per month to feature its clients.
Fortune Marketing was chosen, Maus said, because it had a good reputation and because owner Steve Samblis "was a real straight shooter."
Apparently not enough of a straight shooter to inform Netoy.com that he's been under investigation by the SEC for more than a year for violating the commission's disclosure rules. Maus said he only recently found out about the investigation from a source other than Samblis.
But those promotional dollars may have been well spent. In its short two-week trading history, Netoy.com's shares have jumped from a low of $4 to a high of $19.50 and are now trading in the $11 to $12 range. But those two weeks have also been rife with press releases from a company that seemed awfully eager to promote itself before there was anything to promote. And was the disappearing act of Barney, the Teletubbies and Legos a little cyber sleight-of-hand that gave investors a look at what was not to come?
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SoftNet Industries Inc. had a nice little run-up in its share price last fall when it started trading on the over-the-counter bulletin board. After opening at $2 in November, it spiked briefly at $5 three weeks later. But since then, things have calmed down and the company's gone shopping for some shareraising publicity. To wit: In the past month, it has paid between 60,000 and 80,000 (depending on which disclaimer you read) shares of free-trading stock to two stock promoters in different hemispheres in hopes of reaching new investors.
From North America, there's Cyber-stock.net, but it's not clear how the company was paid to promote SoftNet. In an e-mailed press release, investors are told Cyber-stock received 40,000 free-trading shares. However, the disclaimer on Cyber-stock's website says it received 20,000 free-trading shares as compensation for promoting SoftNet. And from South Africa, Stock-market 1999 was paid 40,000 free-trading shares for giving SoftNet some exposure. It appears that SoftNet is the sole client of both websites. Cyber-stock and Stock-market 1999 both agreed not to sell their free-trading SoftNet shares until March 29, 1999, 15 days after each site profiled "SoftNet."
And what does SoftNet "do" that makes it worthy of so much lucrative hype? It has software it's trying to sell to the Internet gambling industry. So far, according to its own hype, it's got a deal with one "casino" based in Dominica. Terms of that deal aren't disclosed, but SoftNet does bait investors with this statement:
"The Company is targeting fifteen (15) other casinos in the Caribbean for a forty (40) percent stake of the virtual gaming gross proceeds in exchange for the use of their software. Each casino is projected to generate gross proceeds exceeding $12 Million per year for a total of $180 Million annual gross revenue if all fifteen casinos sign on with Softnet." (emphasis original)
About 40 percent of the company's 7.4 million shares outstanding are in the float, with the rest restricted under rule 144 until Dec. 1, 2000. By then, SoftNet expects to have grossed more than $16 million, according to information on its website. Now, investors might not be surprised if a lot of that money was funneled back into continued R&D. But apparently SoftNet is so happy with its current product that software development takes a back seat to management fees. This lump sum of payments will take the biggest bite out revenues, according to figures posted on SoftNet's website. The company says it will pay more than $1.6 million in management fees in the next three years. Compare that to $420,000 in salaries and $1.1 million for sotware development during the same period.
Sounds like a sweet deal for someone.
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WordCruncher Internet Technologies Inc. is the most recent entry in the "search engines are us" category for Internet startups. With no product ready for market, barely any capital and a long string of press releases touting the imminent release of its "unique" technology, WordCruncher's share price more than quadrupled in less than three weeks in January. It's been a pretty steady decline since then, but the press release machine seems to be cranking back up and investors are being lured back with fatuous statements like this one, referring to the beta testing of its search engine, which is called Spyhop:
"…we have added features, made user interface refinements, consulted with industry analysts, and conducted real-time load testing on our hardware and software. Each of these activities is an important building block in constructing a solid foundation that we are confident will enable us to achieve long-term success.''
Gosh, isn't that something a company might do BEFORE they start telling investors about how great it is? Oh, and Spyhop, in case you're wondering, refers to a navigation method some marine mammals use - poking their heads above the surface and looking around. WordCruncher executives seem to think this makes a cute name for their search engine since they refer to the Internet as a "vast ocean of information."
As always, tread lightly……………………
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