You can guess that I am talking about promoted penny stocks. From now on, whenever I write about this, I will update this table:
Date of Article
Price @ Article
Price @ 6/12/12
Personally, I find the consistent losses to be impressive. All of the companies that I wrote about more than three months ago have losses greater than 86%.
Tonight’s loser is Luxeyard [LUXR]. I got this sorry excuse for research today. Six months ago the company, was called Top Gear, Inc., was based in Israel, and had the goal of becoming a leading kosher food certification organization. As a result of an acquisition of Luxeyard, and spinout of the kosher food certification efforts, the company is a website for selling luxury goods.
Well, at least the disclaimer tells some truth this time:
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.
Prior holders of Top Gear, and those who sold Luxeyard to them have paid the research liar to bull up the price so that they can sell into it. Those who buy Luxeyard are dumb; really, really dumb.
Anytime a third party promotes a stock to you, and it is not a normal Wall Street “We provide research so that we can do IPOs and get trading volume,” avoid it. All of these promotions are scams. They don’t make money. Average investors lose, even those that think they can play the speculation game.
Again, I ask why promotions like this are legal. If the disclaimer is small type (this one was 7.5 points), and the regular type encouraging investment is 12+ points, I think the disclaimer should not be valid, and the author, publisher, and backers should be subject to lawsuits, that they forfeit their ill-gotten gains.
By David Merkel, CFA of Aleph Blog