My Two Cents on Two Promoted Penny Stocks

Via Tadas Viskanta of Abnormal Returns, Zestinvest.com approached me regarding and intriguing promoted stock, Implant Sciences [IMSC].  Read his article, he will say more about it than I will.

From my angle, this is another low revenue, negative net worth, negative earnings stock, which I think every sane investor should avoid.  But there are a few interesting aspects to the scam:

  • There is the outside possibility that their services will be bought by an arm of the US Government, in an effort against terrorism.
  • It is being touted by Gene Marcial at Forbes, and at other blogs of his.  Gene Marcial has a financial interest in CPreports.com, which gets paid to publish favorable research on companies.
  • It is being touted by Ray Dirks, which disappoints me.  I always thought better of him, given his early contest regarding insider trading  in the Equities Funding scandal, which he successfully contested to the Supreme Court.  (And as a kid of 13, I sent away for his research on low P/E stocks!  What a guy! Maybe.)

This is a company that is likely to be taken over by its lender in three months, leaving the equity with zero, or nearly that.  The company is so deep in debt that I suspect their lenders will not get paid in full either.

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Onto my second promoted penny stock, Luxeyard.  Wait, first the promoted penny stock scorecard:

Ticker

Date of Article

Price @ Article

Price @ 7/9/12

Decline

GTXO

5/27/2008

2.45

0.03

-98.78%

BONZ

10/22/2009

0.35

0.0171

-95.11%

BONU

10/22/2009

0.89

0.065

-92.70%

UTOG

3/30/2011

1.55

0.07

-95.48%

OBJE

4/29/2011

2.9

0.045

-98.45%

LSTG

10/5/2011

1.12

0.152

-86.43%

AERN

10/5/2011

0.077

0.0011

-98.57%

IRYS

3/15/2012

0.261

0.13

-50.19%

NVMN

3/22/2012

1.47

1.46

-0.68%

STVF

3/28/2012

3.24

0.435

-86.57%

CRCL

5/1/2012

2.22

0.67

-69.82%

ORYN

5/30/2012

0.93

0.6

-35.48%

BRFH

5/30/2012

1.16

0.57

-50.86%

LUXR

6/12/2012

1.59

0.35

-77.99%

Aside from very deep out-of-the-money options, I can’t think of anything that does so badly.  Back to Luxeyard.  How did it lose 78% in less then a month?  Go back to my original post:

NBT Equities Research and/or its publisher, ChangeWave, Inc., dba NBT Communications has received $35,000 and been pledged 75,000 shares of rule 144 common shares in LuxeYard to assist in the writing of this advertisement.

Next Media LLC paid $1,500,000 to marketing vendors to pay for all the costs of creating and distributing this report, including printing and postage, in an effort to build investor awareness.

Next Media LLC was paid by non-affiliate shareholders who fully intend to sell their shares into this advertising campaign.

Duuuuuhhhh.  They have plainly told you that they will fleece you.  Few are so bald in their designs.  Why didn’t you listen?  This offering more than doubles the float, on a company that is worthless anyway.  This is just a way for insiders to profit or minimize losses.

So it is no surprise that the stock has fallen so much, notable as it is to fall so quickly.  But this was eminently avoidable.  Remember the Indian saying: “Lie down with dogs; wake up with fleas.”