Michael Goode – Page 27

Awesomepennystocks.com added to SpamHaus DBL

[Note: As of 7/11/2012 Awesomepennystocks.com has been removed from the SpamHaus DBL]

Many people were surprised when Awesomepennystocks.com and the related group of 20 or more websites stopped promoting pump and dump stock Great Wall Builders (GWBU). The last email I received from Awesomepennystocks.com was at 2:30pm EST on June 24th. Just yesterday I saw a mention of a blog post by a noted spam fighter posted on the iHub Fraud Research Team / Due Diligence message board (the only good message board on iHub). The blog post is the SpamBouncer MainSleaze blog.

The post itself is fairly ordinary — a spam fighter indicated that an email address used only to check for spam received email from Awesomepennystocks.com. The blog post is also fairly old: it was posted on June 5th. The comments are the interesting part. Andrew Barrett, a higher-up at iContact (Director, ISP Relations & Deliverability) replied the same day, saying:

Thanks for the heads-up, Catherine. I’m in Berlin at the moment, but I’ll have our compliance team drop a hammer.

Then there are a few comments from “centroazteca”, purportedly written on behalf of Awesomepennystocks.com (Centro Azteca S.A. is the entity listed at the bottom of their emails). Those comments are quite funny, especially where “centroazteca” writes, “We work with large companies such as Goldman Sachs, and only profile legitimate small companies who are looking to succeed.”

The first reply from “centroazteca” was posted on June 23rd, presumably as the people behind Awesomepennystocks.com realized that Spamhaus Block List was about to add their domain name to its list of domain names that it recommends that email providers not accept emails from (see an explanation of how blocklists work). On June 24th, Andrew Barrett posted the following comment on the blog post:

Hi Catherine, I have killed the account. I apologize for the length of time it has taken to correctly and permanently remediate the issue. I will be working with management to identify all the points at which our processes broke down, and to correct them. All the best, Andrew.

The blogger then asked why “centroazteca” had shown up three weeks after the blog post to comment, and Barrett responded by saying:

Well, I hate to name names, but it rhymes with “Spamhaus”

Tom Mortimer of Spamhaus replied to that comment (bold added):

SBL listings are public record, Andrew. It’s quite alright with us if you name names, although we do appreciate the discretion on other issues. Speaking of which, there were some other issues than simple spam in this case. I can’t go into detail, but suffice it to say that this was most certainly a customer that no reasonable ESP or ISP would want on their network. :/

Right before posting this blog post, I checked the Spamhaus block list and found that AwesomePennyStocks.com is listed as being on the list (marked as a spammer). However, none of their other domain names or IP addresses of which I am aware appear on the list. Check here to see if it is still on the list. I think it is likely that having their main domain name added to the Spamhaus block list forced Awesomepennystocks.com to change internet hosting providers and judging from Barrett’s comments it is likely they are being forced to find a new email service provider.

A cursory check of a few of the websites of Awesomepennystocks.com shows that the welcome emails they are currently sending to new subscribers are being sent using Aweber.com, which is further evidence that iContact is no longer doing business with them.

Consider the timing of the last pump email on GWBU and the comment from Andrew Barrett. I do not think it is a coincidence that Awesomepennystocks.com and related websites have not sent any emails since Barrett wrote that he had “killed the account”. This is an interesting development and may mark a turning point in the effort to fight pump and dumps.

Disclaimer: No relationship with any parties named above (except that I trade pump and dumps) and no positions in any stocks or funds mentioned. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Spam pump and dump: VIBE edition

The majority of pump and dumps are run by stock promoters who advertise online to get people to sign up to their emails lists and then follow the law (at least the CANSPAM law) only sending the stock promotion emails to those who sign up. But spam pumps are not uncommon. Some spam pumps may at least have the veneer of legality by obtaining another pumper’s email list and offering a way to unsubscribe. Some spam pumps are a bit more blatant. VIBE was pumped via spam email from a variety of different fake or free email addresses over last weekend and Monday and Tuesday. Unlike most spam pumps, it even had pretty graphics.

While VIBE did move up impressively on Monday morning, like most spam pumps, however, the stock soon began to drop like a rock. Below is a two-day chart with 5-minute candlesticks.

(click to embiggen)

See the pump image below:

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Disclaimer: No relationship with any parties named above and no positions in any stocks or funds mentioned. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Penny stock lawyer Kenneth Eade sued by SEC

The SEC today sued numerous individuals involved in Gold Standard Mining Corp (litigation release here). The parties are named below (emphasis mine):

On June 29, 2012, the Securities and Exchange Commission filed a civil action in the United States District Court for the Central District of California against Gold Standard Mining Corp. (“Gold Standard”), its Chief Executive Officer/Chief Financial Officer Panteleimon Zachos, attorney Kenneth G. Eade, auditor E. Randall Gruber and his firm Gruber & Company LLC.

The case itself is not particularly unusual. The SEC alleges that the company materially misrepresented the financial and legal details of an acquisition and that the company filed false financial statements. This is par for the course in penny land. What is much more interesting to me is that the SEC sued the company’s attorney, Kenneth G. Eade, and the company’s auditor, Randall Gruber. SEC lawsuits against penny stock lawyers and auditors, while not unknown, are far less common than they should be. Penny stock fraud would be a lot harder without auditors who are willing to ignore suspicious actions and lawyers who give false opinion letters to allow shares to be registered. Below is the essence of the SEC’s case (emphasis mine):

In its complaint, the Commission alleges that, between May 2009 and April 2011, Gold Standard filed numerous reports about its purported Russian gold mining operations that were materially false and misleading in various respects. According to the complaint, Gold Standard represented that it had acquired a Russian gold mining company known as Ross Zoloto Co., Ltd. (“Ross Zoloto”), but did not inform investors that it had agreed to allow the prior owner of Ross Zoloto to keep profits from existing operations or of issues surrounding Russian government registration or approval of the business combination. The complaint also alleges that Gold Standard filed false or misleading financial statements.

The complaint alleges that Gold Standard and Zachos were responsible for these misstatements, and that Eade, Gruber and Gruber & Co. substantially assisted Gold Standard in making these false and misleading statements. The complaint further alleges that Gruber & Co., through its sole member Edward Randall Gruber, misrepresented in an audit opinion that it had audited the company’s 2007, 2008 and 2009 consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board.

See the full SEC complaint (PDF).

If the name Kenneth Eade sounds familiar, it is because he is a well-known lawyer for penny stock companies who made the mistake of suing a bunch of message board posters (including Janice Shell) and InvestorsHub for libel back in 2011. He lost that case badly. Below is a quote from the iHub press release about the verdict:

Kenneth Eade sued iHub and 10 John Doe posters in February of this year for allegedly defamatory posts made on the iHub website. iHub raised several meritorious defenses, including that the comments made by the John Doe posters were protected speech under the First Amendment and that immunity was provided by the Communications Decency Act.

In his 12-page ruling, The Honorable John A. Kronstadt granted iHub’s motion to strike Eade’s complaint in its entirety and without leave for him to amend. The court’s ruling effectively dismissed the action against the John Doe posters as well.

Dave Lawrence, spokesperson for iHub commented, “This federal court ruling finding in favor of iHub and awarding legal costs should serve as notice to others who would engage in frivolous litigation, try to plead around CDA immunity or attempt to chill the public’s exercise of freedom of speech.”

You can’t fix stupid: Investing in pumps

In terms of how long it has been promoted, how long the stock did not go down, and the likely profits of insiders who paid for the stock promotion, UAPC has been one of the more successful stock promotions of 2012. As with all stock promotions, however, the end result is that investors get killed, the insiders who paid for the stock promotions make easy money by selling their shares at inflated prices, and the company never achieves any of the things the stock promoters said it would.

UAPC was featured as Chuck Jaffe’s stupid investment of the week last week. The best part was the response from Barry Gross, who handles the company’s investor relations:

“We would not want anyone to invest on the basis of that [flyer],” Gross said. “But you would be amazed at how many people have received it — or seen something written about us — called us, been told that what they’re looking at is fraudulent and not a good or fair representation of the company, and then they say ‘But where can I buy shares.?’”

This kind of mindset is why stock promotions work. People believe too easily in the beautiful lies told by the stock promoters.

(click chart to embiggen)

Here is what one of the idiots who bought the stock had to say about UAPC (emphasis mine):

He understood that the “newsletter” he was looking at was hype and even figured — correctly as it turns out — that by the time he was looking at the pamphlet, the stock had already popped and the buzz might be wearing off. That said, he felt that if he could buy the company back in the $1 range talked about in the pamphlet, he would benefit when the buzz is gone and the intrinsic value of the company is left for the market to see. “United American really does seem to have locations on the biggest oil deposit in the United States,” Richard wrote, “and the stock is cheap, so what is the harm in taking a flyer? If they hit on one of the properties, wouldn’t the stock do just what [the letter] says?”

The problem is that the stock was not cheap. The stock price doesn’t matter. Stocks are like pies — what matters is not the price per slice (they can be arbitrarily large or small) but the price of the whole pie. With over 45 million shares outstanding as of May and a price around $1, UAPC had a market capitalization of over $45 million despite having almost no assets and no revenues. Even without the pump such a company (unless it was led by someone with tons of experience) wouldn’t be worth $1 million, let alone $45 million.

If you ever have the urge to invest in a penny stock that is touted by a stock promoter, please give me a call. I would be glad to write you a very, very cheap one-year European call option on the stock.

Disclaimer: No relationship with any parties named above and no positions in any stocks or funds mentioned (unfortunately — I would’ve loved to short UAPC and I was previously short but my brokers have not had shares to short for over a month). This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well..

Are VIX Futures ETPs Effective Hedges? No.

This purpose of this post is not to bash certain supposed trading gurus who were so incredibly stupid as to lose money owning TVIX when it was trading at a nearly 100% premium to its NAV (for the pedants, yes I know that ETNs don’t technically have NAVs — they have indicative values, but those function the same way as NAV — it is the value of the underlying asset or derivative contract). Learn more about TVIX at the VelocityShares website. (Speaking of TVIX, I would be chary of buying any product that has scores of references in its prospectus to when (not if) its value reaches $0.)

No, this post is just to let people know that using VIX futures and ETNs based on it for hedging a long stock portfolio is not the best idea. From a paper just posted to SSRN a few days ago (emphasis mine):

Exchange-traded products (ETPs) linked to futures contracts on the CBOE S&P 500 Volatility Index (VIX) have grown in volume and assets under management in recent years, in part because of their perceived potential to hedge against stock market losses.

In this paper we study whether VIX-related ETPs can effectively hedge a portfolio of stocks. We find that while the VIX increases when large stock market losses occur, ETPs which track short term VIX futures indices are not effective hedges for stock portfolios because of the negative roll yield accumulated by such futures-based ETPs. ETPs which track medium term VIX futures indices suffer less from negative roll yield and thus appear somewhat better hedges for stock portfolios. Our findings cast doubt on the potential diversification benefit from holding ETPs linked to VIX futures contracts.

The paper is Are VIX Futures ETPs Effective Hedges? by Deng, McCann, and Wang. See the full abstract and download the paper at SSRN.

Company linked to Awesomepennystocks.com sues Thebullexchange.com for allegedly stealing their email list

Email list theft is not a new thing. Read about a similar lawsuit I previously wrote about. I show some excerpts from the amended complaint below and I provide a few of my own comments. I will post more on this case as it develops.

Case summary at Justia

Initial complaint 3/22/2012 (pdf)

Amended complaint 4/09/2012 (pdf)

Motion to dismiss 6/07/2012 (pdf)

Motion for continuance 6/22/2012 (pdf)

The case is:

MARKETING INTEGRALE CO. v. Todd Roberson, Todd Roberson d/b/a bestdamnstocks.com, thepennystockguru.com a/k/a Jeff Jeffries, William William, Mesa Marketing LLC, otcbullmarkets.com, thebullexchange.com John Does 1-10, ABC Corporation 1-10.

From the amended complaint, we learn the following about the plaintiff:

Plaintiff Marketing Integrale Co. is a web-based Company marketing and customer relations firm, incorporated in Quebec, Canada; principally conducting its business via the internet, and purposefully availing itself to the U.S. Customer base. Integrale maintains core staff in the United States, primarily in Harris County, Houston, Texas and Los Angeles County, Los Angeles, CA.

As you can see from the Awesomepennystocks.com privacy policy page, Marketing Integrale is the corporation behind the website. Screenshot below:

(click to enlarge)

Of course, recent emails from Awesomepennystocks.com have indicated that it is owned by a different legal entity, Centro Azteca S.A.; the most recent email I have on file from Awesomepennystocks.com disclosing in its CANSPAM-required footer that it is Marketing Integrale is from November 6, 2011.

(click to enlarge)

For comparison, here is the most recent email I received from Awesomepennystocks.com. Note that it says it is owned by Centro Azteca S.A.

(click to enlarge)

And the defendants, again from the amended complaint:

Defendant(s)

2. Upon information and belief Todd Roberson, Todd Roberson d/b/a bestdamnstocks.com, thepennystockguru.com aka Jeff Jeffries, William William are the owner(s)/operator(s) of certain web domains that are responsible for Plaintiff’s damages. The address where the defendants may be served with process is at 398 Jade way, Marysville, GA 30558.

3. Upon information and belief Defendant MESA MARKETING LLC, owner of otcmarketbulls.com is responsible for some or all of Plaintiff’s damages. Defendant MESA MARKETING, may be served by providing a copy of this Complaint to counsels, Christine N. Wiseman, Barrister and Solicitor, GILMOUR BARRISTERS, Suite 3 -1 Royce Avenue, BRAMPTON, Ontario L6Y 1J4; or through any other counsel they may so designate, or through their registered agent THE COMPANY CORPORATION, located 2711 CENTERVILLE ROAD SUITE 400, WILMINGTON, DE or wherever they may be found.

4. Upon information and belief Defendant thebullexchange.com is responsible for some or all of Plaintiff’s damages. Plaintiff will serve Defendant thebullexchange.com at its owner(s)’ address where each may be located when said parties are identified.

5. Upon information and belief, John Does 1-10 and ABC Corporation 1-10 are unidentified parties who may be responsible for some or all of the damages incurred by Plaintiff. Plaintiff will serve John Does 1-10 and/or ABC Corporation 1-10 at addresses where each may be located if said parties are identified.

The essence of the legal complaint is that the defendants stole the plaintiff’s email lists. Again from the amended complaint:

13. The Plaintiff charges its customers a dissemination fee (advertising fee) in order for customers to gain access to its email dissemination services to its proprietary database. Upon information and belief, on or around February 18, 2011, the defendants in this case have each/or while in acting in concert by the use of an artifice or scheme, successfully hacked into Marketing Integrale’s server’s hosted at its primarily servers located in the United States at I-contact (http://www.icontact.com). Defendants hacked into Plaintiff’s server in order to gain access, copy, and distribute mail directly to persons on Marketing Integrale’s proprietary e-mail customer lists. By accessing and utilizing Plaintiff’s e-mail list without payment and without authorization, Defendants violated 18 U.S.C. § 2701 and 18 U.S.C. § 1030.

14. Upon information and belief, after the Defendants stole Integrale’s email lists, Defendants incorporated the use of several websites and other associated servers in order to complete their illegal activity.

The allegations in the amended complaint allege the defendants, after having stolen the plaintiff’s email list, then used that email list for their own purposes. Along with various websites, the plaintiffs allege that a couple Twitter accounts and a Facebook account belong to the defendants :

20. Upon information and belief, the websites operated by Defendant Does’ are linked to the Twitter accounts named Sherrybrooks34 and Tracycallies.

21. Upon information and belief, the websites operated by Defendant Does’ are linked to the Facebook account named adria.robinson5.

Mesa Marketing LLC responded by filing a motion to dismiss:

Plaintiff’s pleading leaves open several fundamental questions. What role did defendant Mesa Marketing play in the hacking scheme alleged by the Plaintiff? Who acted on defendant Mesa Marketing’s behalf? How does the website otcmarketbulls.com—allegedly owned by defendant Mesa Marketing—figure into Plaintiff’s claims? The FAC simply does not allege enough facts to infer defendant Mesa Marketing’s misconduct.

Obviously, I am not a lawyer and I cannot evaluate any of the claims by either side.

The most recent filing in the case (on June 22nd) is the plaintiffs’ motion for a continuance, which in this case is a request for more time for the scheduling conference between plaintiff and defendants, for the reason that many of the defendants are unknown to them.

Thanks to Jerry in the Prepromotionstocks chatroom for finding this (he found it somewhere on InvestorsHub, the cesspool of internet stock messageboards).

Disclaimer: No relationship with any parties in the suit. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well..

More fun in penny stock land: fake stock promotions

While I remain primarily a short seller, I also buy pump & dumps sometimes. However, I usually only hold for short periods of time — minutes or hours. While the vast majority of traders of penny stocks lose money (and most of that money is made by the stock promoters themselves, and a small bit goes to short sellers), sometimes buying penny stocks can be lucrative — but only if you are quick and know what you are doing. The chance of outsized gains, no matter how small, leads to a sizeable group of traders who try to make money by buying stock promotions. So while a large stock promotion budget tells me that there are holders of a huge number of shares who want to sell, traders who look to buy stock promotions will see a large budget (not incorrectly) as a sign that more people will receive the stock promotion and buy, sending the price up. Most pump and dumps never go up much, if at all, but that doesn’t keep people from buying them.

Of course, if you are a small shareholder of a penny stock company and want to get the share price to go up, but can’t afford to pay for a stock promotion, what you could do is just put together a fake promotion and then post it on Twitter and internet message boards like iHub (InvestorsHub, the cesspool of the internet). If you convince enough people that the pump is real, you could get the price of your stock to move up. Of course, the SEC might come knocking on your door if you are successful, accusing you of market manipulation.

I came across this post on iHub earlier today and was amused by how badly faked the ‘hard mailer’ was. (For those who don’t know, that is the common term for pump and dump brochures sent through postal mail rather than email). I looked at the image and it was obvious that rather than even printing out and then scanning the faked mailer, the person had simply used image editing software to paste in new text over a scan of a different mailer. See the full image. While the image was obviously faked (notice the lack of any sort of smudge except in a areas where there is no text; also note the different font used for the company name and ticker in the disclaimer at the bottom), I thought it would make for a nice test of image error level analysis.

Here is what that shows us on a small section of the disclaimer (see original at the FotoForensics website):

What this analysis essentially does is it degrades the image down to show just the digital noise. In an unedited image the noise will be random (you will be able to notice original shapes in the image but around those shapes there should be just random noise). An image that combines two images of different quality levels will allow us to see where the two images are combined. Many common editing techniques such as smoothing/blurring will also be quite obvious through this analysis. The above image shows that the company’s name and ticker came from another image with less noise — and most likely were from an undegraded image (i.e., they were created in the image editing program).

Above is another example taken from the fake mailer (see it on the FotoForensic website). The paper crease shows a decent amount of error, as does the two lines just below it, but there is much less error around the other text, including the ticker symbol.

In this case, I didn’t need image error level analysis to tell that the image was manipulated. But it is a powerful tool that can help identify manipulation even in better fakes.

Disclaimer: I have no position in any stocks mentioned. I trade pump and dumps and OTCBB / Pinksheets stocks. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Global Gaming Network (GBGM): First the pump, now the big dump

The GBGM pump has been one of the more interesting pump and dumps of late. It started on Friday June 8th around the open with pump emails from PHD-Trading.com (disclosing $200,000 in compensation). I thought the email was simply spam because I could not remember ever signing up to pump websites with that email (chatroom@reap..trades.com). I thought that email address had simply been scraped off of TimothySykes.com (where it used to be displayed on the chatroom rules page). Only much later that day did I get around to actually looking and I had only ever received one pump email to that email address, from ThePennyStockJerk.com, a website affiliated with BestDamnPennystocks.com. All the BDPS websites had already sent teaser emails talking about their new low-float pump that they would pump Monday at the open (for BestDamnPennyStocks.com and a few premium email lists) and at the open on Tuesday (all the other websites).

It was the strong price action of GBGM that made me look into it — plus Jarmall’s questions about GBGM that convinced me that the price action was not indicative of a pure spam pump. That led me to sign up to the free email list of PHD-Trading. The welcome email I received shortly thereafter was quite informative. At the bottom of the email, the name and address (as required by the CANSPAM law) was GS MEDIA | 2885 Sanford Ave SW #16525 | Grandville, MI 49418. I know from my pump research that GS Media is one of the legal entities tied to BestDamnPennystocks.com (BDPS), which of course was scheduled to have a new pump the very next trading day.

I thought this was a good opportunity to potentially front-run the BDPS pump, so I tried to find any other links between PHD-Trading.com (and GBGM) and BDPS. One link was that BDPS had sent teaser emails saying that their upcoming pump was a low-float stock. GBGM, while having tons of shares outstanding (461 million!), had its float listed as 1.2 million shares on OTCMarkets.com. Another connection was the fact that PHD-Trading.com had both a free email list and a paid product, sold through Clickbank — while there are other stock promoters who sell access to a ‘premium service’ through Clickbank, none has used it as extensively as BDPS. There were other links as well, but I won’t disclose them in a free blog post.

I have front-run BDPS pumps in the past, and it is a risky thing to do. It worked well once and another time they delayed the pump, likely because I had front-run it. I am fairly sure they have delayed other pumps when they were frontrun. However, when I first remember hearing about their HoleinOneStocks.net website back in autumn of 2010, the premium subscribers got one pump a full day before any other BDPS websites (since then they have never gotten a pump earlier than the main BDPS website, so don’t up for them!). If PHD-Trading.com was truly a new BDPS-related website then it would make sense that they woudn’t delay the pump. I bought 40,000 shares at .265, taking a substantial risk (if I was wrong and BDPS didn’t pump GBGM then I would likely lose 50%). I shorted 5,000 shares at Interactive Brokers at .29 to reduce my risk prior to the close and then held over the weekend, selling into the opening spike Monday.

Here is my long trade:

Partly because of me shorting at .29 on Friday and partly because I made some stupid trades, I lost $766 on subsequent trades on GBGM. Click the links to see them: trade 2, trade 3, trade 4, trade 5, and trade 6.

As with almost all BDPS pumps, GBGM has now dropped big from its highs just a week ago and is now well below its price at the beginning of the pump. As with all pump and dumps, it will go even lower in the long run. I do not recommend buying pumps or trying to front-run pumps — those are both very risky and most people who try it lose big. The easiest profits anywhere are from shorting pumps, particularly from the worst promoters. For example, after 41 trades this year shorting the pumps of crappy pumpers, I have made $8800 and my dollar-weighted average profit margin is 11.15% with no losses over $90. (I have had a bad year short selling and have actually lost $1900 on my pump shorts not including my crappy pump shorts or the $8400 I have made with longer-term pump shorts.)

Below is a listing of all the compensation listed from various promoters that I have seen on GBGM. The total compensation is certainly lower than the total disclosed below because some promoters have paid part of their compensation to other promoters.

First are the various legal entities / groups that comprise the BestDamnPennyStocks.com group of pump websites.

BestdamnPennystocks.com (BDPS) discloses, as usual, the most compensation:

BestDamnPennyStocks.com expects to be compensated $500,000 Cash by a non-controlling third party for a GBGM investor relations services.

There is JackpotPennyStocks.com, an affilaite of BDPS:

JackpotPennyStocks.com expects to be compensated $20,000 from a non-controlling third party for GBGM Investor Relations services.

Another group of BDPS-affiliated websites, exemplified by GetRichPennystocks.com, was paid $30k:

GetRichPennyStocks.com expects to be compensated $30,000 cash from a non-controlling third party for GBGM Investor Relation Services.

PHD-Trading.com started the pumping last Friday and prior to that no penny stock traders I know were aware of the website and it appears that got their email list from some other pumper. They have their disclaimer as an image, copied below the quote:

PHD-Trading.com expects to be compensated two hundred thousand dollars for GBGM advertising investor relations services.

(click image to embiggen)

StockMister.com is a 2nd-tier or 3rd-tier pumper that is run by the same company as StockExploder.com (which of course disclaimed the same compensation). Here is its disclaimer:

StockMister.com’s parent company Micro-Cap Consultants, LLC has been compensated up to Two-Hundred and Fifty Thousand Dollars Cash by a third party (Online Marketing Media LLC) for a 1 Week Marketing Program regarding GBGM, Micro-Cap Consultants, LLC has also been promised an additional compensation of up to Two-Hundred and Fifty Thousand Dollars Cash by the same third party (Online Marketing Media, LLC) for the same 1 Week Period of Marketing Efforts regarding GBGM.

Stockmister paid for IPR Agency LLC (see my prior blog post about Tim Sykes looking to sue them for libel) to promote GBGM as well:

We have been compensated up to eighty thousand dollars to conduct one day of investor relations marketing for GBGM by a third party, StockMister LLC.

StockLockandLoad.com is run by a pumper who also runs StockBomb.com and Pennystocklocks.com and Stockrockandroll.com.

StockLockandLoad.com has been compensated twenty-five thousand dollars for this one-day profile on GBGM by MJ Capital, LLC.

Another pumper is Pennystockcrew.com. They win the award for smallest font used for a text disclaimer:

Penny Stock Crew has received $20,000.00 in cash compensation from Hunter Marketing LLC for the one day profile of Global Gaming Networks […] Penny Stock Crew is owned by: ODD Marketing LLC , 433 Plaza Real Suite 275, [Boca Raton, FL] 33432

PennyStocksProfile.com is a small-time pumper most noted for riding the cottails of AwesomePennystocks.com pumps SNPK and GWBU this year. Unfortunately, they use an image rather than text for their disclaimer, which makes me retyped it. The image is copied below the quote.

PennyStocksProfile.com is owned and operated by PLVP LLC. The company has been compensated $10,000 by Online Marketing LLC for publication of this information.

(click image to embiggen)

Another annoying pumper is Investors Alley Inc. (a Quebec corporation) group of at least six websites that used an image to show its disclaimer:

Please be advised that Investor Alley Inc. expect [sic] to be paid up to twenty five thousand dollars from a third party- Micro Cap Consultants – to perform promotional and advertising services for a one day profile of GBGM.

(click image to embiggen)

Stock Connection is a 5th tier stock promoter with a number of websites, including PennyStockPickAlerts.com:

PennyStockPickAlert has agreed to be compensated fifteen thousand dollars for a three day public awareness marketing campaign for GBGM from the third party InterVcap LLC.

Another pumper that promoted GBGM is GlobalInvestmentAlert.com, with which I was not familiar prior to this pumps:

GIA, Inc expects to be compensated up to $100,000 by CF, Inc for one weeks coverage of GBGM.

Disclaimer: I have no position in any stocks mentioned and I have no relationship with any people mentioned, except for Jarmall who is a member of Tim Sykes’ Trading Challenge (I work for Tim with that). I trade pump and dumps and OTCBB / Pinksheets stocks. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Is the Firsthand Technology Value Fund (SVVC) Undervalued? No.

I just read in the WSJ about the plunge in value of a couple business development companies (BDCs) following the IPO disaster that is Facebook (FB). BDCs are interesting creatures — essentially, they are publicly-traded private-equity funds that typically invest in small to medium-sized companies’ debt and equity. Two BDCs were discussed, SVVC and GSVC. The more interesting company was SVVC (Firsthand Technology Value Fund, Inc). The article indicated it was trading at a discount to its cash value. I have in the past made investments / longer-term trades based on special situations and valuation so I decided to exercise my value-investing skills and take a look.

The first thing to do when investigating something like this is to calculate its pro-forma numbers. BDCs have a net asset value (NAV) that is updated quarterly. Because of its large share issuance in April and its large holdings of FB, I had to adjust all the numbers from its most recent quarterly report. Take a look at the Google Doc with my numbers. I came up with net cash value per share of $20.39 and an adjusted book value per share (accounting for the decrease in value of publicly traded stock in Facebook and Intevac since the end of the first quarter) of $24.10. With a closing price yesterday of $18.24, SVVC would seem to be a screaming buy, because it is trading at a 10.5% discount to its cash alone (ignoring the value of its investments).

The problem with looking at the valuation that way is that BDCs exist to invest, and depending on the market’s mood, BDCs can trade at a premium or a substantial discount to their NAV. In fact, it is much more common for them to trade at a subtantial discount to their NAV. One BDC I am quite familiar with, having previously invested in it and analyzed it in detail a few years ago, even talking to their CFO, is MVC Capital (I am no longer invested in it). Of the BDCs that existed a few years ago, MVC Capital was my favorite. As of the market close yesterday ($12.48) and using the NAV from the end of April (the most recent NAV given by the company), the stock is trading at a 27% discount to NAV.

SVVC will not liquidate and give cash back to shareholders. The cash it has will be invested and as a result it should trade in line with other BDCs, at a discount to the total value of its assets. It is currently trading at a 24% discount to its NAV (adjusting for the decrease in value of publicly traded stock since its last NAV report at the end of March, but not accounting for the likely decrease in the value of its private equity investments). This discount is similar to the discount of MVC Capital (which invests in significant debt as well as equity, meaning it has less market / business risk), meaning that SVVC is fairly valued, despite trading at a discount to net cash (liquidation) value.

Disclaimer: I have no positions in any stocks mentioned and no relationship with any people mentioned. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Leslie Howard is now a stock promoter

The website Pumpsanddumps.com has been around for awhile, chronicling various stock promotions (although they haven’t posted in a month). I have subscribed to its emails since last August. I have not always been impressed with the research, but it was a nice near-daily synopsis of current stock promotions. Last January, the site started carrying advertising from a new trading service, FirstMicrocapReport.com (by Leslie Howard) that looked to buy pumps prior to the stock promotions (similar to the service of PrePromotion Stocks). His service was mostly uninteresting to me; I generally try to avoid illiquid stocks. I was never a fan of Leslie’s alert service, although I remain subscribed because I follow almost anyone who moves penny stocks.

Leslie Howard has attracted the ire of convicted felon Michael Osborn (see George Sharp‘s negative website about him: http://michael-osborn.info/). Osborn, while not by any means a trustworthy guy, has alleged that George Sharp is Leslie Howard and also runs PumpsandDumps.com. [Update 26 October 2012: George Sharp appears to have won his defamation suit against Michael Osborn and AbuseofLaw.org. See the original complaint (pdf) and the notice about the court order on Abuseoflaw.org. It is fair to say that Osborn’s allegations have been completely discredited.]

However, who is behind Leslie Howard’s First Microcap Report is unimportant to me. The important thing is that Leslie Howard is now officially a stock promoter. Last Wednesday, Howard alerted HAIR and for the first time disclosed that he had been paid to promote the stock: “First Microcap Report has been compensated with an initial payment of $15,000 for the profiling of this company.” I guess “Uncle Leslie” decided that becoming a stock promoter was a lot easier than being a trading guru — and I have to agree. It is hard to gross $15,000 a month on a trading alert service.

Experienced penny stock traders know not to trust anyone. But it is always good to point that out for anyone new to the scene.

Disclaimer: I have no positions in any stocks mentioned and no relationship with any people mentioned. I trade pump and dumps and OTCBB / Pinksheets stocks. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.