With a headline like that, it’s no wonder that Gumshoe readers have been asking about the latest pitch from Lombardi Financial.
Lombardi is pitching a service I haven’t written about before called Payload Stocks … the editor of the letter is someone named Moe Zulfiqar, which is probably too cool of a name to be made up. He was a research analyst at Lombardi, apparently, and I guess he’s now getting a chance to run his own letter.
What’s the letter about? The pitch is that they’re going to tell you about stocks that are the focus of “investor relations” PR campaigns, before those campaigns start, and that you’ll be able to profit as these promotional firms drive up stock prices for their clients.
Sounds kind of sleazy, right? Perhaps not quite as bad as the strategy that we looked at from a service called Passive Income Trader last year, since that one claimed that they were identifying offshore pump-and-dump stock promotions just as they started and that they could get you in and out for quick hits (later, it turned out, it looks like they decided that they would instead just try to help paying subscriber front-run the promotions they themselves had been hired to publicize). But still, kind of sketchy — just that it’s not quite so close to “riding in the criminals’ wake.”
Payload Stocks specifically says that they’re looking for firms that hired investor relations companies — which means there’s a small but probably ethically important difference between these kinds of promotions and the pump and dump operations that we more typically see. “Pump and dumps” aren’t usually run by the actual company whose stock is targeted, not if the company is real … they’re run by offshore funds that trade the stock up and down and just use stock promotion to manipulate the price. Of course, they’re usually teensy and unimportant companies if they’re real, or completely manufactured reverse-merger shell companies if they’re not real. (Yes, you can buy a “clean” publicly traded shell company, often for less than $100,000, and build whatever kind of story around it that you like.)
But yes, legitimate and operating companies often hire investor relations firms too — and it’s the job of those firms, just like any good PR firm, to drive attention to the company and, yes, get the stock price up. Legitimate firms usually do this because they need to raise money for the business and aren’t a great enough business that they can get large or institutional investors interested. And I’m sure there are sleazier operations that are somewhere in the middle, too, with insiders hiring IR firms because they want to cash out some of their shares at higher prices, etc.
There are also big investor relations firms, and publicity-minded IR employees at large corporations — that’s absolutely true, and they mention Krispy Kreme to give you an example of a stock that was driven in part by a PR campaign. But a billion-dollar company hiring a new IR firm is not going to be the catalyst that brings a double in the stock in two days (or even a 20% gain in a month) like they’re teasing they can do here. At that size, stocks certainly sway with changing sentiment but they don’t catch fire with investors because of a cheap email campaign run by an IR firm.
Lets look at what Zulfiqar is saying… here’s how the ad gets us interested:
“We recommended a small, relatively unknown stock called SafePay Solutions. Within two days, this stock went up 142%
“The stock more than doubled in two days!
“Next, we picked another little-known company called China 3C Group. Within two days, this stock jumped 103%.
“The second recommendations more than doubled in two days as well!
“When a gambler in Las Vegas, Atlantic City or any other casino hits the jackpot with a big paying slot machine, he’s hit the proverbial payload.
“Just like a jackpot, payload stocks are poised to explode out of Wall Street’s starting gate and deliver a never-ending rush of profits.”
Well, SafePay Solutions seems like it was probably a pretty scammy payment processor from all the complaints I’ve seen, though the website still exists, and the stock changed names and is now Emaji (EMJI), which says its a web portal but looks like it’s not much of anything. It has a stock that trades for mere fractions of a fraction of a penny (on the rare occasions when it trades at all). If this stock exists for any reason today, it’s to be a pump-and-dump promoter’s lunch hour activity. (Before it was SafePay Solutions, by the way, it was Netoy.com, a crappy dot-com retailing story in the late 1990s dot com boom — a “web portal for selling toys — that traded up to at least $7 in 1999 before the world fell apart for such lousy stocks in 2000 — probably it spiked up even higher).
China 3C Group is now called Yosen (YOSN), according to Yahoo Finance, and it looks like a little shell of a stock promotion company even though it’s hugely grander than Emaji (market cap is under $20 million, the business is still China 3C’s electronics retailing business, apparently — it actually had some revenue last year).
So yes, they’re talking about trad