Pump ’em, Then Dump ’em: A Current Cautionary Tale

The Blind Squirrel Diaries

By theblindsquirrel, March 26, 2014

“What tangled webs we mortals weave when first we practice to deceive” – Shakespeare

“There’s a sucker born every minute” – P.T. Barnum

I know its been only a few days since my March article ran on these cyber-pages, but there is an issue currently unfolding in the market that simply may not wait until the middle of next month to be disclosed and discussed. I’m talking about a situation that is, in my opinion, a classic “Pump and Dump” scheme being run by one of the best “Pumpers” I’ve ever encountered and a very small and new company that wants to see its stock price soar.

I’m going to tell you all about it in a few minutes in hopes that you haven’t already gotten caught up in this subterfuge, placed money at high risk, and stand to possibly lose most if not all of it in one brief moment. And that moment, if it comes, could be at any time now.

Before I get into that I need to set the stage and tell you how and why I am aware of this. As much as I hate to admit to it, that knowledge comes from a recent personal experience that I ought have known better than to get involved in. But those twin terrors, Fear and her sister Greed, overcame logic and common sense. And it cost me. Not so much as to change my life – I never, ever put more money into any position that would cause me unrepairable harm if it were all lost. I knew what I was into shortly after taking a position and yet chose to ride it. I was making money, and very fast. Greed took over the helm of that little ship and drove it straight into the rocks.

And also remember this: I have previously disclosed that I maintain a little “Vegas” account in which I trade micro-cap and penny stocks for quick in and outs, hopefully to make a profit of whatever size. This isn’t investing – it’s gambling and I know it. The payoff to me is twofold. It allows me to satisfy that inner drive of mine to take big risks in hope of big reward. And the money I make – if and when I make it – is used to acquire the “toys” I want like a new laptop or sound bar for my HDTV or whatever. You get the idea. This lets me enjoy the fruits of my labors in the here and now. Assuming there is any fruit to be had, of course. I DO NOT recommend anyone do this because the risk is quite high and you will lose as often as you prosper. Hence the nickname of the account: The Vegas Account.

I think that’s all the disclosure and warnings I need to make. Let’s get the show started

The two players in this were a website called “Analysts Corner”, the “Pumper” for the company, and the company is Nutranomics, symbol NNRX. Remember the name of the Pumper here – Analysts Corner – we’ll see it again in a minute.

Here’s a somewhat condensed version of the events that unfolded.

On or about the 5th of November, 2013, I found an e-mail in my inbox from a company called “Analysts Corner” (hereinafter referred to as “A/C”). It was a short, 2 page summary of a company by the name of Nutranomics (NNRX) and had the appearance of being some sort of research report. This issue, coded as “Q4 2013, Issue #5.08”, was entitled “Health Without Pills.” It was obviously an announcement that the publisher felt was of real significance for NNRX, one likely to “put NNRX in the spotlight.” It went on to describe how NNRX had secured exclusive North American sales and distribution rights to the Nutriband delivery system, a health supplement transdermal patch. This system, when loaded with whatever health supplements you wanted, would eliminate the need to take those huge supplement pills we all know and hate.

NNRX “is designing these transdermal patches to improve sleep, manage pain, boost energy, and control weight. It’s health without pills direct to the bloodstream.”

OK – it goes on and on about the potential this holds for NRX and investors who see the significance of this development and want to cash in on it before the mainstream finds out. Typical hype and hope stuff. The stock price had closed the day before at $0.682 and was challenging the resistance levels of $0.65 – $0.70 Expectations were that the price would break out of this resistance the next morning and from there, well, nothing could stop it to $1.00.

They closed the letter by saying…

“NNRX could soon reach new all time highs (above $1.48). Remember, this is our expertise. We identify these early situations on the verge of massive success and provide triple-digit gains for our subscribers again and again. NNRX looks to be no exception. If momentum continues this pace, NNRX will soon join the ranks of our most successful picks to date.”

There was more, some with even bigger expectations and claims. I was intrigued, so I took a cursory look at the company for myself and found that, yes, the price had been on a tear to the upside as of late. There was little to no info on the company itself, its management or history. But it fit the mold of a company that I like to dabble with in that Vegas account. And having just closed out another position which left me with some uninvested cash, I was primed and ready for action.

If only I had read just a little further into that report …

At the very bottom of it, in pale print, was a little section that said “Please read our disclaimer and disclosure.” I didn’t do that. I mean, c’mon – aren’t all those disclaimers and disclosures just pretty much the same ole same ol’ boilerplate written by lawyers to get the publication and its people off the hook of liability for anything they say or do? Why waste time reading just another of the same? So I took a pass on it.

Big mistake.

The following AM I watched at the open for that predicted breakout above resistance – it didn’t happen, but so what? The price struggled and I took the leap and put on a starting position at $0.6025. The gambler instinct in me that rides on my right shoulder and whispers to me “go ahead, take the chance!” had carried the day over the common sense guy that sits on the other shoulder and whispers “don’t do it, man .. don’t do it!” The game was on.

As I held this position and watched the price action, the good people at A/C kept up the barrage of mailings with such reassuring and promising reports. On or about November 20 I got another mailing from A/C, edition Q4 2013 Issue #5.19. In it they fanned the flames rather extensively. After identifying what they think are the three key factors in a stock price moving higher (price uptrend, catalyst to movement, and potential price target) they said the following:

“Today was a textbook higher low day and as you can see from the chart below, this action was healthy, helping to move the price back into the uptrend clearly pointing toward $1.75 by January 27, 2014.”

OK, sez I to myself, we’re now at $0.70 and they are projecting $1.75 in two months. Nice if you can get it. What else is going on that could make this reality?

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I then read under the “catalyst” paragraph that…

“This is one factor NNRX has in abundance with the multiple developments on the horizon; including the GenEpic acquisition currently underway, Glucozyme product launch early December and upcoming human clinical trial results due within the next few weeks. Fulfillment of these developments will be major catalysts for NNRX’s stock price, helping push it toward $1.75 and beyond.”

Made some sense to me. All those catalysts working together in such short order is indeed one thing that often pushes prices higher, sharply and fast. If they all happen, that is.

Finally, under the “Potential” category they stated…

“The recently issued research report with a $3.75 target price translates into over 360% upside from todays close.”

I had seen enough. This NNRX, whoever or whatever it might be, seemed to have everything I look for to get into my Vegas account. The way the reports were worded made it seem that this “Analysts Corner” firm was a research firm of one sort or another. And the potential returns they were projecting, well, Sister Greed was licking her chops at the idea and Sister Fear was urging her on with ideas of missing out on this opportunity. I was hooked.

On November 22 I had a small profit and, for reasons I have forgotten, decided to cash out half the position. I sold at $0.7812 p/s, netting a gain of 27.5% in ~10 days. Not too shabby and I still had half the position in case of further gain.

That was when I noticed those disclosure and disclaimer once again and, having some idle time at that moment, decided to have a peek. Fortunately I wasn’t eating when I started reading or I might well have choked to death. First I looked at the disclaimer part. To give some credit where it is due, A/C has one of the easiest to read, most understandable and complete disclaimers I’ve ever seen. They