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written by reader PETROSONIC ENERGY (PSON)

By Anonymous Questions, April 10, 2013

Have you looked into:
PETROSONIC ENERGY (PSON) with a GameChanger ”sonic reactor that converts previously unusable
heavy oil into oil that can flow freely through pipelines”.
Tobin Smith in an 8X10in 20-page folder

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

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Travis Johnson, Stock Gumshoe
April 10, 2013 12:11 pm

Thanks for the question — I’ve gotten dozens of queries about Petrosonic Energy and Tobin Smith, so let me share my thoughts quickly:

I’ve gotten those glossy promotions in the mail, too (you can see their “initiating coverage” note here from September, FYI). Tobin Smith still has that big, glossy TV smile, and seems quite happy in his relatively new role as a stock promoter — he used to run “real” newsletters that depended on subscribers and put out research that represented his investment opinion, and he has a recognizable name (and perhaps a reputation that he can sell) because he has appeared on the business news channels as a pundit … but NBT, the company releasing these reports, is an “investor relations” PR firm. They were hired, they say by a third party, to spread the word on PSON. Here’s how they put it in the disclaimer:

“This report is a paid advertisement….
“NBT Equities Research or its affiliates have received $50,000 in compensation third party agents acting on their own behalf.”

Since the insiders hold a huge chunk of shares that they got either for free or at a fraction of the current price while this shell company was being assembled, I presume that the “investor relations” campaign is designed to prop up the share price so they can sell their shares. Given the history of companies like this, shell companies and reverse mergers that are heavily promoted, I suspect the stated plans to actually turn this into a business will lead to nothing.

The company has delayed their 10-K (annual report) filing, just as they delayed their 10-Q filing last quarter, so we don’t have the most up to date look at their real numbers yet — but as of the last quarter, they had no real business, and no real sales or operations (other than administrative costs).

Their goal, as stated in the filings, is to turn their Albanian heavy oil project (which is their only real asset, as far as I can tell, purchased for roughly a half million dollars in stock and debt last year), into a demonstration project to illustrate the value of their heavy oil de-asphalting sonic technology, which will make other heavy oil producers want to adopt the technology and install it in their operations and pay Petrosonic a royalty.

So … on the off chance that this ends up being a viable project, maybe it’s worth the half million dollars they paid for it, which would be almost a penny a share. Or maybe it’s worth what outside investors paid in a private offering in January, 25 cents a share — though I suspect those “investors” are probably there to benefit from the promotion. But if it’s worth $75 million, at over a dollar a share, then I can’t see it. I wouldn’t buy this company at any price.

(Yes, there can sometimes be money to be made in trading up and down with a stock promotion, particularly in shorting promoted stocks if you can get a short filled and have the stomach for shorting highly volatile stocks — that’s tough to do with penny stocks with most brokers, though folks like Tim Sykes do quite well shorting these ridiculous junk companies … but I can’t trade that nimbly and don’t want to spend my days tracking the ins and outs of this cesspool — stock promotion is a massive business, with hundreds of “penny stock newsletters” promoting every kind of junk you can imagine).

The optimist, with some faith in humanity, would say this particular “investor relations” campaign for PSON is there to help keep interest high enough that they can sell shares to raise money to create a business (if they’re going to try to turn the Albania thing into a real business, they’ll have to raise a lot of cash to do so). The cynic, who’s seen this kind of thing play out hundreds of times before, would say it’s just a shell that’s being used as a pump and dump to enrich the folks who put the company together (and their friends).

The promotion is budgeted to cost about $2.5 million, from what I saw in the initial version of this ad back in January. That means the company is being promoted by an ad campaign whose budget is five times larger than the book value of their assets — what do you think is more important to the share price, their assets or their business or their “investor relations” PR campaign?

There are plenty of interesting investing pundits and investing newsletters out there to read and learn from — but all that happens when we look into ad campaigns that are promoting pump-and-dump penny stocks is that we feel a little sick to our stomachs, and a little greasy just for having touched this stuff.

Companies with real businesses spend their money advertising to customers, not investors. And investment newsletters and advisers and pundits who are paid to promote a stock should be ignored. I’ve said this before, and I’m sure I’ll say it many times in the future — read the disclaimers.

Tobin Smith tried to tell us that he was a paid shill at the bottom of his ad, disclosing the payment he received for “recommending” this stock ($50,000 for the editorial work) so he wouldn’t get in trouble with the SEC. We may have had to pull out the magnifying glass to read it (and yes, I’m sure these promoters are all fully aware that their target audience of investors is folks who are 60-80 years old and includes a lot of people who can’t read that small type), but the disclosure was there.

“Real” newsletters hate pump and dump campaigns because it makes investors suspicious of even the legitimate publishers — though that doesn’t stop all of them from renting out their mailing lists to these promoters. Smith is a more egregious example of this than are many promoters, since he’s more of a recognizable “name” from his Fox Business TV work and many folks don’t realize he’s a paid promoter because of his past life as a legitimate newsletter writer and conference speaker, but there are plenty of pundits who blur the line and try to both write a paid newsletter and “endorse” stock promotions on the side, so be careful. The big publishers value don’t allow this — you won’t see the Motley Fool or Stansberry or other Agora newsletter guys attaching their name to a pump and dump stock promotion where they’re trading against the interests of their readers or being paid to recommend a stock — but plenty of small newsletter editors who have at least some name recognition or history in the business appear quite willing to sell their name and likeness for these kinds of promotions.

What was that again? Oh, yes, read the disclaimers. If you read that someone spent a couple million dollars promoting this stock, or that the editor who is so glowingly describing their prospects pocketed $50,000, that should help to cool your jets a little so you can make a sober assessment of the company in the light of day.

If you do that, looking at the actual SEC filings if you have the patience for it, and see lots of zeros on the income statement and a paucity of actual assets and massive insider stock gifts and a confusing history of reverse mergers and disparate companies all combining together (a gold miner merges with a natural pet food store which changes it’s name and creates a plan for a solar energy farm on the moon! OK, I made that one up, but it has probably happened) … well, that ought to be enough to tell you that reading further is a waste of your time.

But at least you didn’t waste your money.

We hear about these kinds of promoted stocks all the time — companies are spending millions to bring the stocks to your attention, so it makes sense that they do come to your attention. I don’t write about all of them that folks ask about, but every once in a while I do chime in — someone asked about Octagon Resources (OCTX) last week, for example, and that one’s probably not much better than PSON. Often you really do have to look into the company to find out with certainty whether they’re a near-criminal zero or just an overplumped bystander (or, if we hold tight to our thin thread of hope, that one surprise that turns into a real company … haven’t seen one of those yet, ever) …

… but all it should take to make you 99% certain that they’re not worth your money is seeing the ad with the big, highlighted ticker symbol, and taking a quick check of the disclaimer. And when was the last time you could feel 99% certainty about anything in the stock market?

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Des Harms
Guest
Des Harms
April 10, 2013 12:56 pm

Excellent analysis, thank you.

Kim HURT
Kim HURT
April 10, 2013 5:19 pm

Travis,
The more I read your analises and reasoning, the more I feel you are right and many of us naive fools.
Thank you. Please keep up the good work and the reality for us ignorami!
Kim Hurt

Peter Barnes
Guest
April 13, 2013 2:29 pm

Boy you know I got this promo piece that follows the big promo format
I usually throw them out
But there was Tobin Smith who I remembered was a pretty savvy guy maybe 10 years ago?
Your analysis was brilliant
Confirmed nagging doubts that I didn’t know I had because of the guys past had p
, well ….apparent legitimacy
Sad to see where he is
Thanks for your insight
Saved me a ton of time on researching PSON
Best
Peter W Barnes
Westport CT

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gard
Guest
April 14, 2013 11:20 am

As soon as I see a picture of a Yacht, I delete, delete, delete. LOL that’s my laughable cue that it is a pie in the sky Pump and Dump.

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George
Guest
George
May 7, 2013 8:55 pm

If this technology had the potential alleged in this promo, why would Sonora Energy Ltd. sell it to Petrosonic for so little?

kraeaz77
Member
kraeaz77
May 15, 2013 3:25 pm

Just got out of PSON. Made a little money but after more research, glad I still have my socks on. READ READ READ!!!
Thanks for your research, really appreciate it.

Val W Stone
Irregular
April 10, 2013 1:02 pm

I really think you should not be wasting time on idiotic ideas like these !!

Gregory P
Guest
Gregory P
April 10, 2013 1:03 pm

notyhing Tobin Smith has ever promoted has ever made a profit for anyone except the short sellers and himself.

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gummydave
gummydave
April 10, 2013 1:24 pm

Excellent advice as always Travis.
I’m glad you mentioned Motley Fool as I’ve subscribed to them for many years and believe they try to look after subscribers interests. Their advertising is a bit excessive and they certainly have their share of failures. But they give some useful advice and the discussion boards are also a useful resource.

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Ventureshadow
Guest
Ventureshadow
April 10, 2013 1:28 pm

I too received this flyer in the mail. It says nothing investable about Petrosonic. As you say, Travis, their costly desperation means stay away. The one thing this flyer convinced me of is that Tobin Smith has no remaining credibility.

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Rosenmeyer
Rosenmeyer
April 10, 2013 1:54 pm

he has been a shameless self-promoter for a few years now-very sad. at first some folks thought when he left changewave & started NBT he was operating like before-heard he has constantly promoted major losers like Vela or whatever it is called today -think it was china tel before that.

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Dave
Dave
April 10, 2013 2:00 pm

I only wish I had read this sort of analysis before buying Eden Energy (EDNE) a few years back.

Don S
Guest
Don S
April 10, 2013 2:24 pm

Travis,, Thanks for your analysis of the pump and dump promotionals. I get these slick promotionals by email and glossy multi-page snail mail almost daily. On the ones that come in the mail, I always look at the bottom of the last page to see how much the writer was paid to write the promotional material, then toss it. The email promotions often start with a promise to give you the names of must-buy stocks. They almost never deliver. I scroll to the end and then back scroll because most are selling a subscription to a newsletter or a variety of publications. In order to find the names of stocks they are promoting, you have to pay for a subscription. I just wait to read Stock Gumshoe and your excellent analyses of stocks being promoted by the various newsletters. You do a great service to your readers.

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Tom Patton
Member
April 10, 2013 2:37 pm

Why won’t you do a piece on UNXL?

A lot of people are going to get fleeced on that one.

Warmest regards,

Louis Basenese

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philip germain
Guest
philip germain
April 10, 2013 2:46 pm

So, should we read this as meaning you are less than enthusiastic?

thomas doepke
Member
April 10, 2013 2:46 pm

I don’t buy anything tobin is pitching, but would like to know about GNIN if possible.

Camaro Guy
Guest
Camaro Guy
April 13, 2013 4:04 pm
Reply to  thomas doepke

I am long on GNIN. Shorts are having a great time with it. CEO has suspect history, but hey who doesn’t have a blot on the resume. My research is based on blogs and life experience in business. IMHO It has an opportunity to grow with its Bamboo products. Company is getting orders and shipping product (verifiable). New accounts are being approached and added. Cadena’s in So Cal, and BigSaver Foods have made re orders. Hope this helps.

Shoeless
Shoeless
April 10, 2013 3:00 pm

I’ve followed Tobin for years. In the eary days of his news lettter. I lost big time especially on two, NEOM, BIPH. Both had credible products and futures. Both got traded and manipuIated by someone. I keep them to remind me of my mistakes. Changewave still has a “investment portfolio” on the site for members. I collected a Changewave “watch list” starting back about 2003 thru 2006 making a portfolio of 35 stocks. As a group, they are just about even right now. If it was not for AAPL, a buy at 69 in 2006, it would be a big mess. The current site porfolio goes back to a 9/09 entry and has 2/13 as the latest. Less AAPL the list is up 35%. Not horrable for 4 yrs.

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jrlowelljr
Member
April 10, 2013 3:19 pm
Reply to  Shoeless

A few years back I figured out Tobin’s tease of BIIB (before becoming an irregular), bought it, and sold half after it went up 100%. The second half is still going up. I subscribed to ChangeWave for a few months, but that was the only big gain from Tobin’s work. Sad to see what he’s doing now…

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Myron Martin
Irregular
April 10, 2013 3:30 pm

It is indeed sad to see men who were once creditable analysts (warts and all) succumb to the easy money of paid promotions. Travis has it exactly right, if its a paid promotion don’t bite. One organization in the legitimate Penny Stock business has a column every Friday that exposes the most highly promoted “Pump and Dumps” for the week. (Hyperion)! Another one I get infrequently is from John Myers who WAS a very good oil and gas analyst with a newsletter started in Calgary a long time ago has apparently also gone over to the dark side, the latest paid promotion being OCTAGON 88 OCTX, which is another tell tale sign, very few of the pump and dump stocks are ever on the major exchanges.

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Ventureshadow
Guest
Ventureshadow
April 12, 2013 4:42 pm
Reply to  Myron Martin

Regarding John Myers it gets worse. I enjoyed big gains from his picks writing “Outstanding Investments” several years ago, and I was disappointed that he separated from that newsletter. (His replacements have been spectacularly awful). I found a newsletter he writes and sells subscriptions to. They sent me a sample issue of John Myers’ Secret Stocks. The leading pick he wrote about was doing just horribly. There was a good reason to keep these stocks secret. I was left wondering if Myers quit “Outstanding Investments” or was dismissed.

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Myron Martin
Irregular
April 16, 2013 10:11 am
Reply to  Ventureshadow

I would have to respectfully disagree with Ventureshadow that John Myers replacements have been “spectacularly awful” that is a pretty broad brush to paint with. While no analyst gets every pick 100% right due to unknowable future events, no matter how good his assessment of a company at a given point in time. Negative comments on an analyst can often be triggered by the readers own prejudices and bad timing or even lack of “due diligence” for which the blind follower blames the analyst instead of his own failure in assessing the situation at the time of his investment decision, it is a SHARED responsibility.

A good example is the current head of O/I (Byron King) who has made me money on at least a half dozen picks, but has been roundly criticized by some for his pick of HRT the Canadian listed (HRP-V) Brazilian off-shoot of Petrobas who bought the Nigerian off-shore assets of Universal (on which I also made excellent returns) so my original investment is already off the table. Just because HRT fell from over $6. to about a dollar does not make it a bad investment UNTIL the original premise has been proven or disproven.
There are TWO considerations that an objective observer must consider.

1) When and at what price did the unhappy investor BUY, and how much relative to total assets, (portfolio size) are considerations for an objective assessment of a complaint.
2), Since the VALUE of this stock is based on SPECULATION on drilling results that will only become known in the next few months, (after several delays) it can easily still become a brilliant bet IF the drilling results produce a major find on which the well financed company is betting MILLIONS based on preliminary and detailed research. They have far more at stake than any single investor and Byron King knows these proven operators very well.

He is not making a blind stab in the dark, so the question is, did a disgruntled investor make a proper risk assessment AND take an appropriate SPECULATIVE position relative to his portfolio size, or was Byron King at fault for following a speculative play that has not as yet proven his original premise? I for one would certainly would not place Byron King in the same category as Tobin Smith or John Myers. I guess my message is that investors negative comments about an analyst also need to be taken with the proverbial “grain of salt” maybe they just bought blindly on an analysts say so without doing appropriate research on the stock to assess the suitability for their risk tolerance. In the interests of full disclosure, I hold 100 shares of HRP-V as a SPECULATION on forthcoming drilling results, if they come up DRY I MAY lose a few hundred dollars, if they hit a gusher I could make thousands which is an acceptable risk/reward profile for me. Any investor should be happy with an 80% win rate and minor losses on 20%, it is all a matter of sound money management which is a LEARNING process every investor must go through to be successful.

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Fireball
Guest
Fireball
April 10, 2013 3:36 pm

Hi G.S.
I guess many of us fell for this stuff over the years. I have started going one step further. When I get one through an eletter or enewsletter I always blast the letter for running these. I blasted several over Tobin. I just point out that their credibility as anything is questionable if they aid a fraud, pump and dump scammer i.e. Tobin.
I rarely comment anymore but I always read your letter and sometimes the comments.

RICHARD Kinsler
Member
April 10, 2013 4:10 pm

Tobin turns a shill out loud and doesn’t seem to care about his persona. Run like hell and don’t fall for it. It’s nothing but a plumb and dump after all.

RK

Gummyfish
Member
Gummyfish
April 10, 2013 4:31 pm

@ Val Stone: When I started investing in the 70’s we did not have instant access to these types of articles. Hell I did not even have a computer and relied on S&P and newspaper articles. Eventually I got phone calls from boiler rooms. If a proposal sounded good I would buy a “reasonable” position after attempting to do some research. Times and methods have changed. The newsletter has replaced the telephone call. But the vigilance of people like Travis help to prevent unsophisticated investors, who will listen, from making some of the early foolishness I succumbed to.

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whatch
Member
whatch
April 10, 2013 9:36 pm
Reply to  Gummyfish

Hi Dwight,
Like me you most likely had a broker screaming in your ear back then with the next great thing. Man!, I lost a lot of money and respect for brokers back then. I was sure glad to see computers and the internet come about. You know. The thing our kids thought always existed. They are now in their 30s and think I was born in the stone ages.

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Joni
Member
Joni
April 15, 2013 1:24 pm
Reply to  whatch

Was a naive, stockbrokerage assistant for the one of the big companies back in 1981. After working there a few weeks, I realized the ‘stockbrokers’ were nothing more than salesmen, selling the next best thing that was mandated from corporate in NYC. Got licensed myself and went on to greener pastures and although those large brokerage houses have gone by the wayside, not much has changed.

James Kottenstette
Guest
James Kottenstette
April 10, 2013 4:35 pm

Hi Travis,
As usual you are right on. Your research and commentary are a god-send. You have saved this old guy a bundle… not to mention the several good runs as well!
My best, JimK

Aaron Dunn
Member
Aaron Dunn
April 10, 2013 4:39 pm

Pump and Dumps abound, and many new investors get caught up in the promise of some new idea or product. The newsletters that promote the pump an dumps can show you some great results of the money they make, and the huge returns they book because they are getting free shares, or shares at pre-promotion prices they then can sell off into the pump. Funny part is there are now newsletters and groups whose whole investment strategy is to search out and find these shell companies before the promotion even starts. Travis if you ever look into prepromotions.com they are a newsletter that does just that. I don’t subscribe, I would simply feel bad about profiting from people getting fleeced by dishonest and merciless investment scams. I do read daily though the Stock Gumshoe, and love getting the information you share. Doing a great job, keep it up!

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canonfodder
canonfodder
April 10, 2013 7:32 pm

Pump and Dump ! Some time ago I fell for one when I did not know such existed. In my naivete and stupidity I lost big because I believed the wonderful promises and I saw the price rising sharply. While I wasn’t able to be online and watch, later that same day the price plummeted as the insiders dumped. WOW ! I paid dearly for that lesson. Someone should advertise this scam method and warn. Why doesn’t my brokerage have a full page warning to all who pay them for buying and selling? They certainly should.

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Kirk
Member
April 10, 2013 9:12 pm

Good analysis. If anybody wants to speculate on heavy to light tech, look at Ivanhoe Energy (IVAN), they have a real tech and real assets. Still might go BK, but they have a shot. Spec money only.

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