pennystock

First, the promoted penny stock scorecard:

Ticker Date of Article Price @ Article Price @ 7/18/12 Decline Annualized
GTXO

5/27/2008

2.45

0.03

-99.0%

-66.9%

BONZ

10/22/2009

0.35

0.02

-94.0%

-64.2%

BONU

10/22/2009

0.89

0.12

-86.5%

-51.9%

UTOG

3/30/2011

1.55

0.07

-95.5%

-90.7%

OBJE

4/29/2011

2.90

0.03

-98.9%

-97.5%

LSTG

10/5/2011

1.12

0.13

-88.2%

-93.4%

AERN

10/5/2011

0.0770

0.0009

-98.8%

-99.7%

IRYS

3/15/2012

0.261

0.110

-57.9%

-92.0%

NVMN

3/22/2012

1.47

1.44

-2.0%

-6.2%

STVF

3/28/2012

3.24

0.42

-87.0%

-99.9%

CRCL

5/1/2012

2.22

0.625

-71.8%

-99.7%

ORYN

5/30/2012

0.93

0.46

-50.5%

-99.5%

BRFH

5/30/2012

1.16

0.69

-40.5%

-97.9%

LUXR

6/12/2012

1.59

0.265

-83.3%

-99.999999%

IMSC

7/9/2012

1.50

1.13

-24.7%

-99.998982%

DIDG

7/18/2012

0.65

???

???

???

I added an “annualized” field to try to equalize the results over the length of time I have been tracking them.  Helps to highlight how horrible the last six stocks have been.  Big price falls in less than four months.  Most of those have had negative net worth, negative earnings, little revenue, and often have changed industries to the “next hot idea.”

What was hot three years ago?  Mining companies.  Well, not really.  That mostly popped in 2007-8.  But inexperienced investors, those that might buy the promotion for a penny stock, are always late to the game.  Regency Resources IPO’ed in April 2009 for a nickel a share, and has lost money ever since.  No revenue, negative earnings, negative revenues — no action.

They owned two bodies of land where they expected to find gold.  But in a letter to the SEC, the management wrote:

Neither of our officers and directors has visited either La Trinidad Claim or the Mara Claim.  In response to this comment the following has been added to the risk factor disclosure as shown on page 8 in the Form 10-KA and page 15 in the Form 10-QA.

Neither of our two directors has visited La Trinidad or Mara claims.

Our two directors have not visited our two mineral claims, being La Trinidad and the Mara claims.  Therefore, they have no personal knowledge of the mineralization on each of the claims, the terrain and the possibilities of hazards during exploration activities.  They have had to rely upon the advice and opinions of the geologists working on each of the claims.”

For such a tiny company, quite an admission.  Really, the company wasn’t doing much of anything, so they decided to switch businesses to Internet Television, and rename themselves Digital Development Group.  They did this a little more than two months ago.  A more recent press release is here.

So now, when I receive the glossy mailer that says something to the effect of, “Here is the Miracle Company that has a miracle technology that will lead to it being bought out by Google Inc (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB), or Microsoft Corporation (NASDAQ:MSFT) for $2-3 billion dollars,” I say ridiculous.  If I had such a technology, I would grow it myself, with no help from others, or maybe with the aid of a few angel investors.  After all, the company has little in the way of liquid assets at present.  How will it achieve its great aims?

The simple answer is that it won’t, and the stock price will follow the same decay pattern as the above sham companies.  Look at this disclaimer from the tout (done in 5 point type):

IMPORTANT NOTICE AND DISCLAIMER: This is paid advertisement by Eric Dany and/or Eric Dany’s Stock Prospector (collectively, “EDSP”). EDSP has received twenty three thousand dollars from Belmont Group Ltd. in compensation for this advertisement and related market materials to enhance public awareness of Digital Development Group Corp (hereafter DIDG). EDSP also expects to receive new subscriber revenue the amount which is unknown at this time as a result of this advertising effort. EDSP does not perform any due diligence on the stocks and companies discussed herein EDSP relies on generally available public information and representations made by DIDG. EDSP does not purport to provide an analysis of any company’s financial position, operations, or prospects and this is not to be construed as a recommendation by EDSP or an offer to sell or solicitation to buy or sell any security. DIDG, the company featured in this issue, appears as paid advertising. Belmont Group Ltd. has paid eight hundred and fifty thousand dollars for the dissemination of this info to enhance public awareness for DIDG.

On Judgment Day, I do not want to be Eric Dany.  To write glowingly of a lousy stock and say that it is an aggressive buy, in big type, and then in tiny type say that none of this is research — it is all advertising, is the legal fiction hiding the lying.

The SEC should bar these practices, and make illegal the advertising of stocks.  Research is one thing, there are some regulations there, but the rank promotion of stocks is ridiculous.  When I started writing about this, I never dreamed that the results would be so bad, but they are that bad.

By: alephblog