May 20

SEC Suspends trading in NuTech Energy Resources (NERG) due to potentially fraudulent tender offer

Today the SEC suspended trading in NuTech Energy Resources (NERG):

because of questions that have been raised about the accuracy and adequacy of information in the marketplace about the company’s operations and the company’s recent public announcements concerning an unsolicited tender offer.

SEC trading suspension (PDF)
SEC trading suspension order (PDF)

When I first saw the tender offer I immediately concluded that it was almost certainly fraudulent:

nerg_warning

Why was this? Well, a quick look at OTCMarkets.com showed that the company had a total of 42,761,863,781 shares outstanding (42.7 billion shares). The buyout offer was for a price of $0.025 per share, which would value NERG at $1.07 billion. That is an absurd price to pay for a company with total assets of $5.7 million.

These kinds of fake buyout offers on sketchy OTC companies seem to happen one or two times per year. I can’t recall the last time I saw a sketchy OTC buyout offer that actually occurred so my default assumption on these is that they are fraudulent. In the world of OTC stocks, that is a very good assumption. There are occasionally real buyouts of OTC companies but those companies are invariably ones with real businesses with assets in proportion to the buyout price.

 

nerg_chart

Disclaimer No position in any stock stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

May 11

Get SMART: Customizing Interactive Brokers’ smart routing

Interactive Brokers has been one of my main brokers since 2007. Yet I didn’t realize until today that you can customize the smart routing of orders. I was trying to figure out how to set a hotkey to set a market/ECN destination (route) and stumbled across the smart routing configuration which is even better than what I was looking for. Read IB’s description of how it works.

The simple explanation is that you can set the smart router to prioritize execution (in various ways) or prioritize ECN rebates. This only affects orders where you are adding liquidity (when you are taking liquidity the smart routing always prioritizes execution). For someone who trades a lot of low-priced stocks, ECN fees and IB’s per share commissions add up fast. By setting my smart routing to always go to the highest rebate venue I will dramatically lower my trading fees on low-priced stocks. Simply put, I should have looked into this long ago and saved thousands of dollars in commissions.

For the record, for adding liquidity on Nasdaq stocks under $1, the best route is NSX, which offers a rebate of 0.25% of the trade value.

Here is a screenshot of how I have my smart routing configured now:

SMART

Disclaimer: No position in any stock stock mentioned above. I have no relationship with any parties mentioned above except that Interactive Brokers is one of my brokers. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

May 09

Code Rebel $CDRB SEC suspension: Only 2nd ever SEC suspension of listed stock

On May 5th the SEC suspended trading in Code Rebel (CDRB) for two weeks. The stock will resume trading on May 20th on the grey market. Code Rebel had been promoted multiple times by stock promoters and was most recently promoted on May 2nd. The reason for the trading suspension as given by the SEC:

The Commission temporarily suspended trading in the securities of Code Rebel Corporation because of questions regarding the accuracy of statements in CDRB’s Forms 10-Q for the quarters ended June 30, 2015 and September 30, 2015, and the Form 10-K for the year ending December 31, 2015, concerning the company’s assets and financial condition.

SEC trading suspension (PDF)
SEC trading suspension order (PDF)

What is most interesting is that this is only the second time the SEC has suspended trading in a stock listed on a stock exchange. Normally if the SEC is investigating a listed stock the exchange will halt the stock and then the stock will be suspended by the SEC only after the stock has delisted.

The only other stock to have received an SEC trading suspension while listed on an exchange is Forcefield Energy (FNRG). Of note, there was also a criminal case against individuals involved in FNRG, and in the case of FNRG the Nasdaq had halted trading a day prior to the SEC trading suspension.

 

cdrb

Disclaimer from most recent email promotion of CDRB:cdrb_pump

Disclaimer No position in any stock stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

May 09

And then there were none: SEC suspends trading in second consecutive Finest Penny Stock pump

Today marks the death of big paid stock promotions run by opt-in email stock promoters. The number and effectiveness of the big promoters had been declining for years, with numerous SEC trading suspensions, lawsuits against promoters, lawsuits against gatekeepers (brokers and lawyers), and criminal prosecutions. First went BestDamnPennystocks, then Awesomepennystocks, then StockTips. The number of lawsuits against lesser stock promoters over the last few years is too high to count.

Today’s suspension of trading in the FinestPennyStocks pump Midwest Oil and Gas (MWOG) after their previous pump BRKO had also been suspended should end the effectiveness of this stock promoter and leave the US markets with no truly effective stock promoters. Perhaps the most interesting thing is that FinestPennystocks has connections to AwesomePennystocks and Eric Van Nguyen — so it is not surprising that they were targeted by the SEC but only surprising that they were targeted so slowly.

MWOG will resume trading on the grey market on May 23rd. The reason for the trading suspension was “recent, unusual and unexplained market activity in the company’s stock taking place during a suspicious promotional campaign.”

SEC Trading Suspension (PDF)
SEC Trading Suspension Order (PDF)

mwog

Big budget snail mailer stock promotions have almost completely ceased over the last few years; from scores per year in 2013 to only one effective big budget mailer last year (Nugene International, NUGN, endorsed by Kathy Ireland). This all started back in 2013 with the SEC suspension mid-pump of Biozoom (BIZM) and the creation of the SEC’s microcap task force.

For the record, here are all the websites of which I am aware that are affiliated in some way with FinestPennystocks (whether by having promoted the same stocks or having the same IP address as websites that have promoted these stocks):

 

FinestPennyStocks Pennystocks.de
FinestPennyStocks pennystocksborse.de
FinestPennyStocks AmazingPennyStockPick.com
FinestPennyStocks AmazingPennyStockPicks.com
FinestPennyStocks StocksThatSoar.com
FinestPennyStocks PoisedtoSoar.com
FinestPennyStocks Stockstrategysecrets.com
FinestPennyStocks Wallstmagazine.com
FinestPennyStocks FinestPennyStocks.com
FinestPennyStocks SmartStockChoices.com
FinestPennyStocks Thebestofthemarket.com
FinestPennyStocks smartstockwinners.com
FinestPennyStocks bestamericanstocks.com
FinestPennyStocks stocktipmagazine.com
FinestPennyStocks PennyStockRepublic.com
FinestPennyStocks Pennypros.net
FinestPennyStocks PennyStocksWinner.com
FinestPennyStocks PennyStocksforMe.com
FinestPennyStocks pennystocksborse.de
FinestPennyStocks BestRisingStocks.com
FinestPennyStocks BestProfitableStocks.com
FinestPennyStocks BestProfitableStocks.com
FinestPennyStocks TopRisingPennystock.com
ElitePennyStock ElitePennyStock.com
ElitePennyStock Pennystocksthatrise.com
ElitePennyStock ElitesPennyStock.com
ElitePennyStock Qualitypennystocks.com
ElitePennyStock mysoaringpennystocks.com
ElitePennyStock TopGainPennyStock.com
ElitePennyStock EquitiesThatSoar.com

There were a number of stock promotions that both the FinestPennystocks and ElitePennystock websites promoted and a number that only one or the other group promoted.

 

Disclaimer No position in any stock stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

 

Mar 17

SEC Suspends trading in FinestPennyStock pump Broke Out $BRKO

Today, less than two minutes prior to the market open, the SEC suspended trader in Broke Out (BRKO), the current FinestPennystock.com pump that has squeezed shorts like crazy the last two days. The stock will resume trading on April 1st. Likely among those shorts getting squeezed the last couple days is Hunter Adams of The Street Sweeper, which had two negative reports on BRKO and reported being short BRKO in those reports.

I think it likely that this suspension will kill or at least greatly reduce the efficacy of FinestPennystock. AwesomePennystocks was forced to ‘retire’ by SEC trading suspensions on two consecutive pumps and Stocktips.com became much less effective after the May 2014 trading suspension of PGFY. FinestPennyStocks has connections to Awesomepennystocks so this SEC trading suspension is surprising to me only in how long it took since FinestPennystocks started pumping successfully 18 months ago.

 

SEC suspension press release (PDF)
SEC suspension order (PDF)

 

From the SEC press release:

The Commission temporarily suspended trading in the securities of BRKO because of concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in BRKO’s common stock.

 

BRKO

2016-3-17 BRKO 1m

Below are the FinestPennyStocks websites from which I have received BRKO pump emails:

PennyStocksWinner.com
FinestPennyStocks.com
SmartStockChoices.com
Pennystocksforme.com
BestAmericanStocks.com
SmartStockWinners.com
PennyPros.net
SmartstockWinners.com

The prior FinestPennyStocks pump was CLOW which was preceded by EURI.

Disclaimer No position in any stock stock mentioned above. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Jan 05

Great new technologies, horrid investments: Does this describe Editas $EDIT?

One thing growth investors and stock promoters love is a brand new industry that is growing quickly and revolutionizing our lives. The problem is most of the time much of the companies end up losing money and even going bankrupt even as the new industry blossoms because of fierce competition. This happened with railroad companies in Britain in the mid 1800s, electronics companies in the US in the 1960s, computer companies in the 1980s, internet companies during the tech bubble in 1999, and has happened over the last few years in LEDs and solar panels. In most of these cases most companies did poorly and there were only a few companies that came to dominate the industry or if there were no good barriers to entry or many competing technologies, cutthroat competition has continued. Most of these stories have been told before and better than I could tell. So I will concentrate on the LED industry which is one I know well and has not been well followed by most people.

Light emitting diodes (LEDs) have been around for decades but only in the last decade have there been improvements in the technology such that they could be used in normal lighting situations rather than just as indicator lights. The first LED light bulb I bought back in 2008 produced 200 lumens of bluish-white light (~7000k). For comparison, 800 lumens is what a standard 60-watt incandescent bulb produces. That bulb was made by Lighting Science Group Corp (LSCG) and cost about $50. The most recent LED bulbs I bought (made by GE and sold at Home Depot) cost $3.13 each and produce 760 lumens or warm white light (2700k).

I just finished converting my house entirely to LEDs. The light quality is as good as incandescent bulbs, they use much less electricity, and they stay cool (which means less chance of fires and lower air conditioner usage). They also on average last far longer. The problem for manufacturers of LEDs is that no manufacturers have technology that is vastly superior to the others or patents on essential technologies. So while LEDs are high-tech, producing them is a brutal business. There are a handful of large manufacturers of the actual LEDs (e.g., Seoul Semiconductor, Epistar, Cree, Philips, Osram, and others) while there are thousands of companies putting those LEDs together with the electronics to drive them in bulbs. The large producers make a normal profit but most of the producers of LED bulbs make little.

Here is a chart of CREE, one of the ‘winners’:

cree

Cree has done well but the company’s stock is where it was essentially a decade ago.

Here is the chart of one of the losers, Lighting Science Group (LSCG):

lscg

Lighting Science of course was my most profitable short ever back in 2008. Even though the company did go on to successfully market its products, they have not been profitable because of lower-cost competition.

 

LED lights are pretty awesome and within a decade 90% of new fixtures will use them. In two decades’ time LEDs will have 99%+ market share in general lighting for home and industry. Besides their aforementioned advantages, their unique properties also have made it possible for many of the poorest in the world to use a small solar cell and battery to power LED lights and charge phones, reducing the use of kerosene lamps and resulting in cleaner air and better health.

Why bring this up now? I am really excited about CRISPR-Cas9 and have publicly said that I would love to invest in any company in that space. Editas (EDIT) just filed an S-1 prospectus to go public. Anyone who is in awe of the possibilities of this gene editing technique including myself would do well to consider the similarities to past highly-hyped new industries. That is not even considering the legal morass that CRISPR is in right now with multiple groups having filed competing patents.

 

Disclaimer: No positions in any stocks mentioned. I have no relationship with any other parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

 

(By the way, if you are looking to get a large number of non-standard LED lights (such as T-8 lights), I recommend Chong Ming LED — I found them through Alibaba and purchased 180 T-8 tube lights for an LED retrofit at the daycare run by my church. I also highly recommend Hyperikon, which has a large selection of bulbs available on Amazon.)

 

Nov 19

How to be dead wrong about Kalobios Pharmaceuticals $KBIO

Needless to say, my previous post on KaloBios Pharmaceuticals was dead wrong. Martin Shkreli and friends bought up the majority of the company over the past couple days (at under $2 per share on average) and their SEC Form 4s after the close yesterday caused a massive short squeeze that sent the stock up to $24 in premarket today. The one thing I did not account for was the possibility that someone would see value in the company’s drugs and rescue the company. That is essentially what Shkreli is doing, as he explained to Fierce Biotech. In the future I will avoid any such overnight shorts on companies with substantial intellectual property even if I think it has little value, particularly if the market cap of the stock is low. Even a small risk of a catastrophic loss on a trade is too much.

I apologize for completely failing in my analysis. Luckily I had set up an alert for SEC filings on KBIO so I was able to cover my short for a small loss (around $4,000 net) at $2.0833. Hopefully my readers also avoided catastrophic losses. If you look at my trades on Profit.ly you will see a large loss at IB but a slightly smaller large gain at CenterPoint Securities. It is quicker for me to trade at CenterPoint so I just bought there at first to get flat.

Below is a screenshot of my posts in TimAlerts chat mentioning my cover and the news:

KBIO_chat

See all my posts here.

Disclaimer: I have no position in KBIO but I will likely trade it after posting this article. I have a close business relationship with Tim Sykes (see Terms of Use for details). I have no relationship with any other parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Nov 16

A short analysis of Kalobios Pharmaceuticals $KBIO liquidation value

Disclosure: I am short KBIO and I intend to actively trade the stock after this post is published. See full disclaimer below.

Here is my back of the envelope calculation of the value of Kalobios Pharmaceuticals (KBIO). This was first posted in the TimAlerts chat, where I am and have been a moderator for years.

Nov 16, 2:37 PM MichaelGoode okay here is my analysis of KBIO — using very optimistic assumptions (as a short, to make the analysis more conservative for shorting): $10m in net quick assets as of June 30th. Assume cash [burn] until today equal to same rate as last quarter. […] They burned $5.8m in Q2. So that is $1.93m per month. Four full months since then and one half month so estimated cash burn of $8.7m. Even assuming no extra shutdown expenses that would leave them with $1.3m to distribute to shareholder

Nov 16, 2:37 PM MichaelGoode KBIO With 4.12m shares outstanding that equates to a liquidation value per share of $0.32 per share

Nov 16, 2:39 PM MichaelGoode KBIO caveats — this assumes no costs after today, no fees to the liquidator and no severance fees to employees. However, this also assumes the same compensation expense each month up until now and the company has laid off workers prior to today

Nov 16, 2:43 PM MichaelGoode KBIO and another caveat (this is negative for the stock) – the PR Friday mentions “As a part of its wind down and handing over management of the wind down to The Brenner Group, the company expects to phase out the remaining employees over the next thirty to sixty days.” — so there will be significant compensation expense over the next two months (no clue how large).

I looked up the company’s restructuring / termination expenses and at least for the first series of layoffs:

The Company expects to substantially complete the restructuring efforts in, and related charges will be incurred through, the fourth quarter of 2015. The Company estimates that it will incur total restructuring charges consisting of cash expenses for one-time termination benefits of between $400,000 and $500,000.

The above is from the November 9th 8-K filing. It would be reasonable to estimate another $300,000 in one-time payments to the remainder of the workforce.

I welcome feedback on my analysis. The relevant news can be found here:

Kalobios to wind down operations (November 13)
KaloBios to Reduce Workforce, Explore Strategic Alternatives (November 5)
10-Q for quarter ended June 30th

 

Disclaimer: I am short KBIO and I intend to trade this stock frequently after this is posted. I have a close business relationship with Tim Sykes (see Terms of Use for details). I have no relationship with any other parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

 

 

 

 

 

Nov 06

Fraudulent market-moving tweets net $97 in profits and a criminal indictment

The SEC yesterday announced a lawsuit against Scottish trader James Craig for imitating Muddy Waters and Citron Research twitter accounts and in those fake accounts alleging fraud at public companies that caused stock declines.  For details, see the SEC complaint (PDF).

The SEC’s complaint alleges that Craig’s first false tweets caused one company’s share price to fall 28 percent before Nasdaq temporarily halted trading.  The next day, Craig’s false tweets about a different company caused a 16 percent decline in that company’s share price.  On each occasion, Craig bought and sold shares of the target companies in a largely unsuccessful effort to profit from the sharp price swings.

The tweets at the center of the allegations can be seen below:

Capture2 Capture

 

The Financial Times has a witty take on the absurdity of this case. What is the moral of the story? Don’t try to impersonate people and then use false info to manipulate stocks — it doesn’t matter how little money you make, the SEC will come gunning for you.

 

Disclaimer: No position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

Nov 04

2016 Chicago Michelin Guide Bib Gourmand Restaurants (Map)

So I put this together just because I hadn’t seen anyone else map the list this year. See the list at the Chicago Tribune.

The Bib Gourmand recognizes restaurants with very good food and good value (two courses and a glass of wine for $40 or less), a noteworthy distinction for budget-minded diners.


Disclaimer: I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

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