About 10 years ago, a now notorious 15-year old teenager showed investors how easy it was to manipulate the media and make hundreds of thousands of dollars by hyping up a penny stock in chat and message board rooms. Such pump and dump scams are declining, but still all too common in the investment world.
The strategy is simple: buy an obscure stock at a low price, hype it up by aggressive marketing, let price rise along with the demand, and sell at the top of its price curve. Do it well, and you can make millions out of this, while those investors who came late and bought large positions are left holding stocks that are worthless.
Now, not to make any accusations at all, here’s one stock today that has really piqued our attention:
Penny stock AlphaTrade.com (OTC: APTD) suddenly spiked in Friday’s trading, moving up 40% to $0.007 in early trading on a huge volume of 409.15 million. That got our attention. What drove this stock up out of the blue with more than $2 million in volume on an otherwise sleepy Friday?
AlphaTrade.com claims that it is a North Vancouver, Canada-based company specializing in creating network opportunities to build brands, sell more products, and increase Web traffic, for its clients.
The company hasn’t released any tangible news as of late, so we set out to find out what went on behind the curtains. Granted this is a REAL company, we’re not suggesting otherwise. APTD has been around for many years, and many traders use their software (no matter how outdated and sloppy it is).
But look harder, and you’ll see why we think today’s trading is very suspect.
AlphaTrade last week released an outlook for its business. The company says that under the “skillful management” of its CEO Gordon Muir and an aggressively growing sales team, it has revitalized outlook for 2010. AlphaTrade says that it is hopeful of new levels of sales, revenue and growth continuing into the fall. It also says that it is going to report a positive second-quarter cash flow, following the positive cash flow reported for the first quarter.
And for argument’s sake let’s forget about the paltry $4815 they reported to have in cash against the whopping $7.2 million in liabilities the company reported in their latest 10-Q filing. Yes, they actually do file financial reports, that amazed us too when we saw it. Kudos to them in that respect.
Alright, so the company does have some meaningful operation. But, does the company’s business outlook really justify today’s surge? Or is someone just out to make a quick buck? Maybe two SEC filings made by the company on July 8 can give us an answer.
According to one of the filings, Katherine Johnston, the company’s vice president, acquired 5,000,000 of shares of AlphaTrade.com common stock at $0.0008. According to the other filing, CEO Muir acquired 3,040,000,000 shares (yes, you read correctly that is 3 BILLION shares!) of AlphaTrade common stock at $0.0008. Also note the fact that Muir acquired these shares in a debt conversion, so who knows what amount was really paid for the shares?
Let’s do some quick math here …
3 BILLION shares x $.0008 = $2.3 million. That’s a lot of faith in a struggling company, good job Mr. CEO. In a recent press release, the company said its customers are positioned to benefit from its customer service and quality product development “… brought about by Mr. Muir’s revitalized level of enthusiasm for the Company.”
With the 3 billion shares he just acquired, there’s no wonder he’s got a love for the company all of the sudden.
With last week’s promotion those same shares now saw some nice gains: 3 BILLION x $.007 = $21 million. Shares dropped 20% this morning to $0.005; but Friday’s gains marked a more than 900% profit in less than a month! Very nicely done, sir. Will you please manage my money too?
Too bad this CEO appears to be more adept at trading his own company’s stock than he is at running the actual company.
So there are the bones; two senior executives in the company acquire huge stakes three weeks ago. The company releases some positive outlook, obviously manipulated by those same executives with a sudden confidence in their obscure company. The penny stock suddenly surges.
Easy profit? For Mr. Muir it certainly appears so.
For the shareholders? It would not surprise us at all to see this stock crater back to previous levels and even much lower on the heels of this enormous amount of stock that was just “acquired.” After all, ask yourself, what kind of fundamentals does this company have to justify this surge?
About BeaconEquity.com
BeaconEquity.com is committed to producing the highest-quality insight and analysis of small cap stocks, emerging technology stocks, hot penny stocks and helping investors make informed decisions. Our focus is primarily on the underserved OTC stocks market, or “penny stock” market, which has traditionally been shunned by Wall Street. We have particular expertise with renewable energy stocks, biotech stocks, oil stocks, green energy stocks and internet stocks. There are many hot penny stock opportunities present in the OTC market everyday and we seek to exploit these hot stock gains for our members before the average daytrader is aware of them.
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