Are you planning on running a pump & dump campaign? If so, you may find it beneficial to hire a corrupt fee-based analyst to write a rosy, professional-looking report. No worries if your stock is clearly a horrible investment, as these analysts will feature any stock in a positive light. See my article on some corrupt analysts here.
Swingplane Ventures (SWVI) has become the latest penny stock of interest, with professional traders and amateurs alike watching its every move. SWVI rocketed out of the gates on Wednesday 23rd January, opening at 0.19 (after huge volume premarket) and hitting highs of nearly 0.3 shortly afterwards. The stock traded millions of dollars in volume on that day, despite no news or material developments taking place. On the days prior there had been only a handful of SWVI trades.
I have had numerous enquires from beginners to penny stocks who are confused about SWVI, so this article will answer some common questions, and hopefully educate at least a few people on how stocks like this work.
What caused SWVI’s sudden flurry of activity?
The catalyst for such a huge spike in price and volume for SWVI was a promotion from the infamous “Awesome Penny Stocks” group. “Awesome Penny Stocks”, or APS as they are often referred to as, is widely regarded as the most powerful and influential stock promoter in the world. APS spends millions of dollars on advertising to collect emails from people who are interested in buying penny stocks, and then recommends buying a particular penny stock to its subscribers. They have numerous websites (the main one is awesomepennystocks.com) which altogether have sent millions of emails to people urging them to buy various speculative penny stocks.
With a massive and highly responsive email list, APS can bring in enormous buying to any stock it recommends – always millions of dollars in the first day of announcing a new stock, as what happened with SWVI.
Does SWVI have strong fundamentals and a thriving business?
Absolutely not. A look at SWVI’s latest 10Q shows total assets of $159,394, total current liabilities of $184,257, and no revenues. There is absolutely nothing to justify SWVI’s market cap of around $100,000,000. The stocks that APS recommends are never real companies, with real business operations. They exist only to sell as much stock on naïve investors as possible.
APS sends emails to its subscribers recommending that they buy SWVI, while selling SWVI stock to their subscribers at the same time – this is how APS recoups their advertising costs and makes their money. The numbers here are very high. While we cannot know APS’ profit margins, I strongly suspect they make net profits in the tens of millions of dollars per year, if not the hundreds of millions.
How can you make profits trading SWVI?
It is very possible to profit from the manipulation and buying that APS creates for stocks like SWVI. APS promotions almost always spike up very quickly upon being announced, since there are literally thousands of people who will buy the stock immediately. If you are quick to put in a buy order, then you can get filled on the stock very quickly and make a large percentage return in a matter of minutes (just look at how SWVI spiked up quickly on the morning of January 23rd, when it was first announced). Here is just one example – a profit of $2,358 in a matter of minutes, by buying SWVI as soon as APS announced it.
With the right research, it is also possible to predict what the next APS promotion will be before they announce the stock. This way, you can buy the stock the day before APS announces it, and make an enormous percent return very quickly. There are numerous connections between the different stocks APS has promoted that can be uncovered.
There are a couple of services that do work like this for you, such as Pre Promotion Stocks (of which I have been a member of for a year and which I strongly recommend).
Several people made thousands by buying SWVI the day before it was promoted by APS. Here are just a couple of good trades that have already been posted:
The way to not make money on stocks like SWVI (and unfortunately, the way many people lose their retirement savings) is to invest in them long-term, since they always collapse eventually. Every single stock APS has promoted in the past has had a horrible death. It can take anywhere from a couple of weeks to a few months, but it always happens. Playing these stocks long after they have been announced by APS is for experienced traders only. The (relatively) easy money is to buy them on or before they are announced, and sell after they quickly spike up.
Where is SWVI headed in future?
I cannot predict where SWVI will be trading at a week from now, but I believe the most likely scenario is that the stock will have sideways price action for a few days (not moving up or down) before then either breaking out to new highs, or falling apart. I do not plan on trading SWVI from here on. The stock will eventually collapse as all APS-promoted stocks do, but how the stock behaves from now until then is up for debate.
For more information on SWVI
If you become a member of Pre Promotion Stocks, feel free to private message me in the chatroom (I am username ‘bossss’).
3D printing has been a super hot industry lately and many 3D printing related stocks have been making serious moves over the past couple of months. I wrote this article for Seeking Alpha “3 Exciting 3D-Printing Related Stocks“ which gives a brief overview of a few 3D printing related stocks (ONVO, CIMT, PRCP). Contact me if you would like me to look into any other 3D printing related stocks (there are many more out there).
PUB CRAWL (PBCW) – Launched on Monday morning by Victory Mark. There are a few people who made a lot of money buying this one immediately upon confirmation (couple good trades here and here). Stockpromotionsecrets.com, which I subscribe to, had done a research report on this ticker earlier and labeled it an obvious AwesomePennyStocks shell (many people believe AwesomePennyStocks and Victory Mark are connected). If you had an order all ready for this one, and the right broker, it was possible to get filled in the .07′s and then sell around .15 when it first started dipping a little. The time for trading PBCW is over now; it could go anywhere.
PSYCHIC FRIENDS NET (PFNI) – Launched around 12pm on Tuesday by Stock Market Authority (SMA). Not many opportunities to make much buying this one immediately on confirmation as it opened at 0.35 and hit a high of 0.42 very quickly before dipping. Not too many people could get filled anyway. SMA’s last promotion was SANP and there were little opportunities to make a lot buying that one upon confirmation either. PFNI though has had a nice, gradual climb over the past three days. Anyone who is still long on PFNI should of course be selling some along the way to minimize risk.
LIVEWIRE ERGOGENICS INC (LVVV) – Launched around 1pm on Thursday by The Bull Exchange (TBX). The one had suspicious trading activity on Wednesday, like many TBX picks do, but holding it overnight or trying to scalp it back then was risky. LVVV didn’t do particularly well upon being announced by TBX, hitting 0.2 before coming right back down again (even going g/r at one point). This is not the kind of activity that would be expected from an A-list promoter. Unless LVVV goes on a run to the mid 0.2′s and 0.3 (which I believe is highly unlikely), TBX’s reputation as being a top promoter is tarnished here.
I believe World Moto (OTCBB:FARE) is a prime candidate to be the next Stock Market Authority (SMA) promotion. For those of you unfamiliar with them, SMA is one of the top promoters in the business – their last two promotions were SANP and SEFE. There is the potential to make a lot of money if you know what they will promote in advance.
So why do I think FARE could be an SMA pick?
1) FARE’s website is www.worldmoto.com. If you lookup the whois information on this domain, this is what you get:
Domain Name: WORLDMOTO.COM
Registrar: GODADDY.COM, LLC
Whois Server: whois.godaddy.com
Referral URL: http://registrar.godaddy.com
Name Server: NS73.DOMAINCONTROL.COM
Name Server: NS74.DOMAINCONTROL.COM
The websites for past SMA deals (santomining.com for SANP, and sefelectric.com for SEFE) have very similar whois information – both have DOMAINCONTROL.COM nameservers, and were registered with GoDaddy. This is very coincidental.
2) FARE has all the red flags of a typical big stock promotion. They very recently (on November 14th) changed their name and ticker from “Net Profits Ten” (ticker NPFT) to “World Moto” (ticker FARE). Ticker and name changes are very normal prior to a large promotion. A very similar thing happened with SMA’s latest promotion SANP, which was previously a dental business (nothing to do with their current business of mining exploration). Promoted stocks very rarely actually engage in real business operations; the only thing that matters is creating a good story that investors will find attractive.
3) I believe the story and website behind FARE would be compelling to investors. The product is a meter for motorbike taxis in Thailand, which seems like something that could sell and reach a large coverage very easily. Already FARE’s product has received a fair amount of coverage, as can be seen on their website. SMA promoted stocks have operated (or at least pretended to operate) in a wide range of industries. SANP claimed to be a mining company, SEFE was some crazy alternative energy idea, RAYS was a product claiming to lower bandwidth on online videos. I can easily imagine SMA promoting a motorbike taxi meter product.
4) In their latest 10Q FARE has practically no assets and no revenue whatsoever, again very standard for stock promotions where the goal is to dump as much stock as possible, rather than actually sell a product. FARE has a very high outstanding share count (146,688,825 at the last count, if I’m not mistaken), higher than past SMA deals, and the main shareholders (Paul Giles, Chris Ziomkowski) hold a lot of shares; the fact that there is a lot of stock to sell leads me to believe this will be a promotion from a big promoter, like SMA, or AwesomePennyStocks/TheBullExchange. I’m leaning towards SMA of course. It’s possible, due to the high outstanding share count, that FARE will start at a lower price than past SMA deals.
Some more general information on FARE:
So far I’ve spent just a few hours looking at FARE, and I’m sure I could dig up a lot more if I kept looking (I haven’t yet investigated the main insiders). At this stage the main thing that leads me to believe it could easily be an SMA promotion is the similar nameservers and GoDaddy registration to past SMA stock websites. Whether or not it’s SMA, though, I’m very confident that some big promoter group will promote this at some point.
Past Results: How I Found SANP As An SMA Promotion Very Early
Back in September 8th, I’d been in contact with the owner of Pre Promotion Stocks, who brought SANP to my attention (this is well before it traded a single share); I looked into it and thought it could easily be an SMA promotion, and I was right (though we didn’t announce it).
I am bringing up my old research on SANP this just to show I have some experience in digging into promotions like this. It’s very possible that I could be wrong about FARE, but in any case, I strongly recommend keeping an eye on it. To keep up to date with this stock I recommend joining Pre Promotion Stocks (if you do join, feel free to private message me in chat, username ‘bossss’).
November 21st 2012 / A couple weeks back I wrote about how HGSH is super sketchy and that it would likely come down shortly; surprisingly, HGSH has done just the opposite and broke out to new highs. I’ve suffered some annoying losses on this stock now, the worst being after that big sudden move up on the 13th on low volume. After that I boxed most of my position because I thought it could still keep running and indeed it did. On the whole though I will acknowledge that my trading on this stock has been undisciplined.
I am still convinced more than ever that the recent moves this stock has been making are the result of manipulation, and that HGSH has no business being anywhere near these levels. HGSH was going to be taken off the NASDAQ for trading under $1 for a prolonged period of time, and they needed to keep it above that for 10 trading days in order to stay listed, and I think that’s the only reason all this crazy activity in the stock is taking place. I suspect that “Redchip” (an IR firm which is working with HGSH) may be helping them with this. In their latest HGSH report, they have this curious disclaimer:
So Redchip.com is being compensated more shares if HGSH trades at a higher price. Redchip’s last report on HGSH was on September 20th (download it here), when HGSH was trading at just $0.29; they gave it a “speculative buy” rating and a target price of $1.49. I’ve taken a look at Redchip’s disclaimers and reports for some of their other clients, and haven’t found another disclaimer of theirs that says they get compensated more shares if a stock trades higher.
Other stocks of interest:
The infamous promoter “Stock Psycho” has had some strong promotions lately, the last one being GYWT which held up for a full day before crashing on Tuesday. If you can get filled on these early on then you can make some huge percentage gains, but you need to be in and out quick. If you lost money trading GYWT then you’re doing something wrong. If you can’t get filled within 2 or 3 minutes of it being announced, then CANCEL THE ORDER and don’t trade it. And since these are usually just one-day deals there is no reason to hold it overnight.
Graphite Corp (GRPH) is the latest Graphite pump, after NGRC which I wrote about before. There is a mailer out for GRPH now (see here). I thought the idea of a graphite pump would be a good idea and it looks like there is a lot of potential in these stocks. Kind of like the next Stevia, for anyone who followed STEV/STVF. So far GRPH hasn’t had good price action though and I see no reason to buy it.
SYNC is a stock which people keep asking me about, especially since my article about how SYNC has been manipulated by the NIA got posted on Seeking Alpha; that article now has over 3,000 views and so I hope I’ve educated at least a few people. I believe there is zero edge in trading SYNC now. Maybe it goes up, maybe it goes down. I want to make it clear that the purpose of my article was on how the NIA has manipulated SYNC, and not whether or not SYNC is currently overvalued/undervalued.
According to their recent emails and tweets, “The Bull Exchange” (TBX) (one of the top stock promoters) will be coming out with a new pick next week, so watch for any interesting movers.
November 14th 2012 / The “National Inflation Association” (NIA) is a highly corrupt, unethical stock promotion newsletter that has caused millions of dollars in investor losses with their recent pumps BVSN and SYNC. The NIA is run by Jonathan Lebed, an SEC-convicted stock manipulator who first came to prominence back in early 2001, when he was found guilty of artificially manipulating thinly-traded penny stocks by posting false news on message boards. This was just the beginning of Lebed’s long career in stock manipulation, and well over a decade later he is still as active as ever in obliterating the net worth’s of his gullible followers.
Lebed’s latest score is Synacor Inc (NASDAQ:SYNC), which was first profiled by NIA on May 2nd 2012. The stock traded an impressive 3.62 million shares that day and closed over $10. The day before that it had traded less than half a million shares, so it’s easy to respect the buying power that the NIA newsletter can bring in. In the two or three months since the NIA first profiled SYNC, the stock usually traded over ten million dollars worth of volume each day, which I regard as very impressive. And while SYNC did not do quite as well as BVSN (the past promotion from NIA), it did hit highs of around $18 in July, before coming all the way back down and then some. At the time of this article, SYNC is trading at just $4.56 – less than half of the price when it was first profiled by NIA.
It’s true that there was plenty of money to be made trading SYNC as a result of NIA’s promotional activities, and many intelligent traders did make money (either by going long at the beginning of the promotion, or shorting around the highs) – but the sad fact is that the losses from less-than-intelligent investors who held and hoped have been horrendous. On my stock analysis request form, I’ve had numerous enquires about SYNC, including from one NIA-subscriber who had lost over $60,000 by buying over $10, then blindly holding into Q3 earnings for no reason other than “I’ve lost too much on this stock and can’t afford to sell.” These cases are not uncommon. Given the volume and buying that took place in SYNC at its highs, there have to be more than a few horror stories. And the National Inflation Association newsletter is still going at it, trying to pump up SYNC and bring in buyers with an increasing air of desperation.
It’s been over 6 months since NIA sent its first email hyping up SYNC, and it’s been ridiculous how many emails NIA have sent in total promoting this stock. In my Gmail inbox, which subscribes to the NIA newsletter, I have 367 emails from the NIA encouraging me to buy SYNC (plus 40 more which landed in the spam filter). That is a total of over four hundred SYNC promotional emails that the NIA has sent me since early May. Indeed, every minor piece of news that SYNC comes out with results in a plethora of hype-filled emails from the NIA urging its followers to buy. Those who suffered losses on SYNC ought to have asked themselves, why is the NIA pushing this stock so heavily? Is their only motive to make me money by recommending this great stock? Or are they trying to line their own pockets? In the finance industry, there is always an ulterior motive, and indeed the primary goal of the NIA newsletter is to make money for itself and not necessarily its subscribers.
How Does The National Inflation Association (NIA) Make Money?
While most sleazy stock promotion newsletters take cash payment to promote stocks, it seems that the NIA makes most of its money by buying large positions in the stocks it promotes, and then selling those shares into its subscribers after spiking the price up. This is the same kind of thing that Lebed was doing 13 years ago, but on a larger scale. I believe it’s very possible that the NIA is also being paid by major shareholders of the stocks it promotes, although we can’t be sure.
In the case of BVSN (NIA’s prior pump to SYNC), which went up well over 400% from when the NIA first profiled it, I believe the NIA made millions (or at least was up millions at some point) by buying a huge amount of shares in BVSN before the promotion and then selling after the stock had been artificially pumped up. There is big money involved here. NIA easily generates millions of dollars a day in volume to the stocks it promotes, and if they can take a large position in a stock and spike it up a whole lot, they can sell and net serious profits. Again, given Lebed’s history of deception, it wouldn’t surprise me if there was more to it than that (i.e. money under the table that isn’t disclosed) but for now I’ll just assume that NIA’s primary business model is buying positions in stocks and hyping them up to its subscribers.
While BVSN was a huge win for the NIA, it seems that SYNC was a complete and utter disaster for them. I believe the NIA has lost around $2,000,000 on this stock. If they had sold their entire position around the highs of $18, they would have made a lot of money, but they didn’t. Instead the NIA held on to its SYNC shares all the way down to its current price of below $5. That’s what their disclaimers across the 400+ SYNC emails reveal, and by law those must be factual. NIA has had a large position in SYNC ever since they first started promoting it and they still do have a very large position. If the NIA’s disclaimers are to believed, NIA originally had a 350,000 share position in SYNC on the day it first promoted it (May 2nd), which they had purchased at an average price of $8.53. Later the NIA added to this position, owning a maximum of 497,799 shares, and now they own 486,035 shares. According to their disclaimers the NIA has held 486,035 shares of SYNC since August 26th.
If the NIA still has this huge 486,035 share position in SYNC, and the stock is fading heavily (both in price and volume), it’s hardly surprising that they are desperately trying to pump this stock back up again. At this stage I believe the NIA would resort to any means necessary to make some of their money back. Whether or not they believe SYNC really is as great a company as they say it is, is irrelevant. Unfortunately for the NIA, it’s clear that their efforts are yielding diminishing returns, as the majority of their subscribers have presumably already been bombarded with SYNC promotional emails and are no longer receptive. But they have certainly done an enormous amount of promotional work on SYNC and are probably going to continue for some time.
FACT: The NIA Has Misrepresented SYNC, And Will Continue To Do So
Even after learning of Lebed’s dark history of stock manipulation, and of the fact that the NIA has a 486,035 share position in SYNC and is thus heavily motivated to try to spike the stock up, there are people who will deny that the NIA has lied or manipulated SYNC. A truly great, undervalued stock does not slowly downtrend from around $18 to less than $5 in the space of a few months. There are only two possibilities: either the NIA was dead-wrong about SYNC, or they were lying the whole time. The NIA has come up with a number of excuses for SYNC’s lackluster performance, including “illegal” short sellers (the standard pathetic excuse from promoters), the share lock-up expiration (where NIA claimed that certain venture capital funds in SYNC would sell after August 13th in order to raise capital, and that this had an unnatural bearish influence on the stock), lack of awareness among prolific investors and so on. None of these explanations are even close to convincing. SYNC stock has done badly for a simple reason, and that is that the company is not performing well.
SYNC released their Q3 results on October 24th, and since then the stock has dropped a further 35%. Why? Because SYNC’s profits have been declining, with the company reporting Q3 net income of just $0.02/share (down from $0.07/share in 2011). Those interested in discovering SYNC’s fair valuation can research the matter themselves, but there are a number of problems the company faces that the NIA never mentions, such as the fact that SYNC derives the majority of its revenue from a very small customer base, and that with the move to smartphones SYNC’s revenue is taking a serious hit. Refer to the following links:
The focus of this article is not whether or not SYNC is currently fairly valued at below $5. It’s quite possible that SYNC will rebound now that it has fallen so much, or it could continue dropping. The important thing to understand is that the NIA has grossly misrepresented the health of SYNC stock to its substantial subscriber base, and caused some horrible investor losses as a result.
How The NIA Builds Its Subscriber Base
How is the NIA able to bring in so much volume to stocks like SYNC? I cannot know all the ways in which the NIA has built up their subscriber base (although I’m very curious), but it seems that much of their traffic comes from the videos that they upload to their NIA YouTube channel. NIA links to their website and encourages visitors to signup in the description box for all their YouTube videos, many of which have a large number of views. In the popular video “National Inflation Association co-founder admits NIA is a FRAUD” (worth watching in its entirety), it is estimated that the NIA spends around $30,000 to $40,000 per video on YouTube advertising, on top of production costs. I’ve also noticed text advertisements on YouTube for NIA’s website, inflation.us, although I would think the number of subscribers brought in from these ads is relatively minor. Currently, NIA’s YouTube channel has over 42,000 subscribers, and their videos have millions of views in total. I can only make wild guesses as to how many newsletter subscribers the NIA has.
The NIA builds credibility for itself by producing professional thought provoking documentaries and branding itself as a political-commentary newsletter, and the majority of NIA-subscribers who enter their email and join the newsletter surely do not suspect that it’s actually being primarily run by a psychopathic twenty-something year old stock manipulator. I very much doubt the NIA is really interested in influencing political ideology or helping Americans “prepare for inflation”. It is my belief that the newsletter exists only to pump up stocks, which they do very well.
What’s In Store For The NIA and SYNC?
It looks like the NIA is going to continue promoting SYNC for some time, as if the 400+ emails already sent have not already been sufficient. After that, assuming the newsletter keeps running and Lebed stays out of prison, the NIA will probably come out with a new stock promotion sometime, which will very likely crash at some point just like all of Lebed’s past stock promotions. A lot of money will be made from those who understand how the game works, and a lot of money will be lost. As the popular saying from PT Barnum goes, “there’s a sucker born every minute.” Don’t be a sucker. Understand that the NIA is only trying to make money for themselves, and don’t hold their picks long term. It’s my hope that by writing this article I can help at least a few people save their money and not get taken in by these schemes.
If you have any questions about this article or anything else, feel free to contact me.
November 12th 2012 / Grizzly Gold Corp (OTC:GRZG) is a dangerous stock to be holding long at this stage. If you’re new to stocks of this nature, you may be wondering why. After all, GRZG currently has a beautiful, gradually up-trending chart with increasing volume, and broke to a new all time high of $1.75 on Friday. But professional traders know that this stock could fall off a cliff any day. It’s not a question of if, but when. GRZG will crash 50%+ at some point and the collapse will be quick. It is quite possible that GRZG will continue running for a few days (maybe even break past $2), but the ending is coming, and it’s going to be brutal.
Make no mistake: GRZG’s recent activity is NOT because of any news or business developments from the company. Rather, GRZG’s current aesthetically-pleasing chart is a result of a $1,100,000+ stock promotion campaign from “pennystockschaser.com”, “pennystockmomentum.com” and “Wealth Generation Report”, who have been contracted to hype up GRZG so that the insiders (and there are a few of them) can dump their shares. There is nothing new here. GRZG is just yet another gold pump & dump, with a generic company website and horrible fundamentals.
All those who believe in GRZG are encouraged to read the latest 10Q, where it is revealed that GRZG has a mere $93,404 in total assets and no revenues, despite having a current market cap of around $80,000,000. GRZG is not moving upwards because of any business developments, or because intelligent investors feel it’s a good buy. It’s being manipulated upwards by promoters, who are paid to con gullible ‘investors’ into buying this stock thinking it’s a real company. The insiders of GRZG who hold stock (and there are a few) are selling into this artificial buying. As GRZG has 47,900,000 outstanding shares, there is quite a lot of stock to dump, and that’s why “Wealth Generation Report” has been paid over $1 million to send out a mailer advertisement to try to bring in as many suckers as possible to buy this essentially worthless stock.
Thanks to @iancassel for posting this picture of the GRZG advertisement (this is the only one I can find, as I don’t live in the USA and don’t get these promotional mailers – but if you do have a GRZG mailer and have a better picture please email me):
It strikes me how similar this GRZG advertisement is to other gold pumps of the past, and there have been many. GRZG has land in Nevada which is being hyped up in these advertisements as containing huge gold deposits, although there is absolutely nothing to indicate that this is the case. There have been plenty of gold pumps just like GRZG that have all had spectacular deaths (LBGO, LSTG, SAGD etc.), but in particular I am reminded of AAGC, a past gold pump and dump that took place back in September 2011 which was very similar to GRZG (a gold exploration company based in Nevada, whose stock had a slow gradual uptrend before collapsing 90%+ in the months ahead). If you go ahead and take a look at some of the gold-based pump & dumps of the past, and compare them to GRZG, you’ll find the similarities are uncanny. There is nothing unique about the GRZG promotion and very little creativity going on here. It’s just the same old formula which has worked before and is still working due to the abundance of sucker investors who still get taken in by these horrible schemes.
As this excellent research report on GRZG shows, the primary stockholders of GRZG who are trying to dump stock (especially Paul Strobel) have a dirty history, having been involved with pump and dump schemes in the past – Strobel in particular was a director for the past pump and dump RNGC. It is very common with pump and dump schemes for the main insiders and shareholders to have a fair amount of experience running these operations. Since sending out advertisements to buy worthless stock is still technically legal (as long as there’s a disclaimer), the people who run these schemes can just rinse and repeat and do it as many times as they want.
Running a pump and dump like GRZG is fairly straightforward as long as you have a few hundred thousand dollars in capital to invest. I believe (based on the volume some of these pumps get) that the ROI’s can be very high, although it’s difficult to determine exactly how much of a stocks volume is from gullible investors and how much of it is from day traders and wash trading. GRZG traded over $1 million in stock on Friday and I believe AT LEAST $200K-300K of that is from gullible investors who are buying it for the first time (again, it’s really difficult to say, I’m just guessing so that number could be well off) who receive a mailer advertisement and decide to buy, and it’s these people who are going to suffer horrible losses in the near future as the stock price plummets and they’ll be left wondering why.
Make no mistake: GRZG is going to fall 90%+ in the months ahead. Do NOT hold this stock long-term. I am writing this post only to hopefully stop at least one person from losing their retirement savings on this stock. It’s horrible and I see it happen too often. If you’re still confused on how pump and dump schemes like GRZG work, or you disagree with anything here, please contact me and I can help you out.
November 3rd 2012 / China Hgs Real Estate Inc (NASDAQ:HGSH) is the latest mystery stock whose sudden activity has been a serious source of confusion. Based on my research so far, I believe HGSH is a horribly sketchy stock with numerous red flags, and that longs are about to experience some serious pain in the coming weeks. This post is only scratching the surface, so if you have any information on HGSH not covered here (especially regarding any promotional campaigns currently taking place) please contact me.
On Wednesday 31st October, HGSH opened at $0.43 and creeped all the way up to a closing price of $1.1 on volume of around 200,000 (less than 0.5% of HGSH’s outstanding shares of over 45M). For a NASDAQ listed stock that kind of action is peculiar, but the real action came in the next two trading days, when we saw a huge spike in volume. On Friday, HGSH broke $3 before fading the rest of the day and closing at $2.25, still up over 400% from before Wednesday.
On both Thursday and Friday, HGSH traded over 1,000,000 shares. The stock barely traded at all for months before this, so what is the cause of this huge spike in price and volume? I have not found any material developments or news for HGSH that would explain such sudden interest in the stock. Think or Swim news and Google news are empty, there is nothing on HGSH’s ihub board regarding any developments, and no SEC filings have been made in the past 3 days. Some argue that such a surge in price and volume is because the stock was previously “undiscovered” or “undervalued”, and it has only just caught the attention of prolific investors independently researching the stock, but I strongly disagree.
A little probing reveals that HGSH has many skeletons in the closet. Unusually for a NASDAQ listed stock, HGSH has a history of being promoted by penny stock newsletters, which strongly leads me to believe that the recent action this stock has had over the past 3 trading days is a result of nothing other than hype and manipulation.
Those unfamiliar with stock promotion should refer to this excellent article. Legitimate companies with real business operations do not pay stock newsletters huge sums of cash to send out thousands of emails urging people to buy stock; rather, they use their cash to invest in their business. The only reason stock newsletters are paid to promote a stock is because some large shareholder (usually a company insider such as the CEO) wants to dump stock on sucker investors. There have been literally hundreds of pump and dumps over the years, which I won’t go into now – those interested can research the matter themselves. All you have to understand here is that when a stock is being promoted by newsletters that are paid in cash to bring in buyers (as has happened with HGSH) then you have to be VERY suspicious.
It’s a good thing there are services like Stockreads and Hotstocked which archive promoter emails so we can look back at when certain stocks were covered by different newsletters. The first instance I can find of HGSH being promoted is on August 23 2011, by “StockProfessors.com” (see their promotional HGSH email here). According to their disclaimer, Stock Professors expected to be compensated $25,000 for covering HGSH, by a third party “EEA”. Later on August 28th 2011, the infamous Beacon Equity promoted HGSH for $10,000 cash (this time the paying party was “Emerging Equity Advisors”). On November 8th 2011 another stock promoter was contracted to promote HGSH this time for $25,000; then finally on November 19th 2011 yet another promoter group (“Penny Stock Prophet”) was paid $35,000 to promote HGSH. Refer to the following links:
The stock newsletters who promoted HGSH back in 2011 have promoted a number of different stocks, all of which inevitably collapse and cause disastrous losses for naïve investors who were manipulated into buying them. Sometimes it takes days, sometimes weeks, or even months, but promoted stocks always eventually come back down. And indeed this is what happened with HGSH as it hit a low of around $0.25 in early October this year – roughly a 75% loss for anyone that brought it back in November 2011 when promotional emails urging people to buy were sent out. Now it looks like it’s round 2 for HGSH, as the stock has gained a huge surge of activity on no news, just like before – only this time I don’t yet know who or what promotional group is behind it all. But I predict the ending of this round is going to be just as brutal.
Those who believe in HGSH will claim that it is a real company with real business operations, unlike the vast majority of promoted stocks. If HGSH’s unaudited financial reports are accurate, the company does have some assets and cash flow, but I am extremely suspicious of the real health of this company given their history of stock promotion and the area of business they operate in (Chinese real estate). A Chinese real estate stock would not be suspicious in itself, except when it happens to have a huge surge in volume out of nowhere and when it has a history of being promoted by stock newsletters. In my mere 2 years of experience in the stock market I have already seen numerous Chinese scam stocks which – just like HGSH – were listed on the NASDAQ exchange and had serious activity for a little while before being busted and exposed as scams. Some food for thought (these are just a few links, anyone who wants to research dodgy Chinese stocks can find dozens of articles and cases):
Avoid Sketchy Chinese Stocks
Are China’s Real Estate Stocks the Next Great Fraud?
Evergrande stock tumbles on fraud accusation
Chinese stock scams are the latest U.S. import
SEC Nails Another Chinese Stock Fraud Scheme (AUTCF)
So here we have a stock with unaudited financial reports, which was previously hyped up by corrupt stock promotion newsletters, which dropped 75% in the months since it was promoted, has numerous similarities with other China-based stocks that were revealed to be engaging in fraudulent practices, and has now spiked up huge for apparently no reason whatsoever.
I will continue researching HGSH and encourage others to do the same. It would not surprise me in the least if a group like Citron Research, Muddy Waters or “Infitialis” were to find some pretty nasty details about HGSH if they were to spend some serious time looking into it. There’s also a reasonable chance the SEC is going to investigate HGSH after its recent huge volume spike out of nowhere, if they were at all competent. The vast majority of major pump and dumps seem to go completely unnoticed by the SEC, but HGSH is listed on the NASDAQ exchange, which I believe makes it far more likely for its recent crazy price action to hit the SEC’s radar. I also believe that anyone who is long on HGSH over the weekend risks facing huge losses in the event of an SEC halt or a negative report on HGSH being published by a major research group.
As you would expect, I am going to be looking for shares to short of HGSH every day from here on and will update this blog post to disclaim my position if I do ever have a position in the stock. I subscribe to Pennystocking Silver where I learnt that apparently the broker “Capstone Investments” had plenty of shares to short on Friday (Tim Sykes made an easy $4500 shorting at $3/share). Unfortunately, I only currently have access to Interactive Brokers and Suretrader, so I’m not that hopeful on getting any shares to short (plus I don’t have a lot of capital in those accounts anyway). I am not going to give a price target on HGSH, but I am very confident that we are going to see a serious collapse this coming trading week or next.
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October 22nd 2012 / I had been trying to short SANP at Interactive Brokers (never got filled) and Suretrader (no surprise they didn’t have any shares) for the past few days, as had many traders. After SANP broke past $1/share it was very likely the stock would fall off a cliff at any moment. It had a very impressive, slow gradual uptrend from under $0.5 to $1 in just a few trading days, and it was only a matter of time before it would come back down again. I really wish I could have shorted it but I am not surprised that I couldn’t.
I got a buy-in notice from Interactive Brokers on my NGRC short at the end of the trading day on Monday, which means I’ll probably be brought in on Tuesday morning when the market opens – that is unfortunate also because it really looks like NGRC is running out of momentum at this stage and is probably due for another collapse sometime, or it could just gradually downtrend. I think it’s highly unlikely more serious promotion comes in for NGRC beyond what has already been done and I would be very surprised if it actually spikes higher.
ZERO is actually still up, so that’s the one short I am going for right now.