Press Release Scams and Successes: Reading Between the Lines

Press releases are a means through which companies can keep the public up to date regarding their recent affairs. It is the duty of every public company to keep its investors and indirectly potential investors aware of what is going on in the company. It should not be forgotten, however, that it is in the ultimate interest of the company for the price of the stock to increase. Consequently, companies are increasingly selective about what and how information is presented in such releases. Your mother always told you, "If it sounds too good to be true, then it probably is." That popular adage holds particularly true with regard to penny stock companies' press releases. Certainly all press releases are optimistic; companies would not release them otherwise. But when looking to invest in a company, be aware of overly ambitious, optimistic, and unsubstantiated press releases. A company that has had annual revenues of 10 and 11 million for the past two years and that claims that the coming year will bring revenues of 40 to 50 million, better have a darn good reason. Examining press releases by breaking down the argument into its underlying logic is an excellent way of uncovering reasoning that has been intentionally muddled to appear better than it is. For example, if a company says that its software sales increased 300% over the past year but do not indicate what percentage of their total revenue was composed of software sales, be suspicious. If a company does not lay out a detailed plan explaining how they will make money and increase earnings, it is likely that their only source of revenue is selling valueless shares to sucker investors.

Another diversionary tactic more frequently employed by Pink Sheet Stocks but which have also been used by OTC-BB stocks, is ambivalence about their filing status. These companies know that one of the most sure-fire ways to increase the price of the stock and thus the earnings of the investor is if the stock becomes listed on a higher exchange. (That is, the OTC-BB for Pink Sheet Stocks, the NASDAQ for OTC-BB, etc.) Because of this knowledge, unscrupulous marketing firms or even the companies themselves will release information indicating that they either will file or have filed the financials and paperwork necessary to apply for another exchange. This release is typically followed by a sharp increase in the stock price, and then?nothing. If pushed the company generally makes up some garbage about how for one reason or another now was not a good time to file after all, but that they had sincerely planned to all along. The reality is, they were driving up the price so that they could dump the stock and make a killing off unsuspecting investors. Unless you specifically know 100% for sure that the company has actually hired the personnel and then physically handed over the financials to be evaluated, you should follow this simple advice:

When a company says = What it actually means is

We are planning on filing this quarter = We are planning on selling our shares this quarter.

We have filed with the SEC = We will soon be under investigation by the SEC for what we are currently doing.

That is not to say, however, that you should not generally trust and act upon Press Releases. One type of positive Press Release of particular note to Penny Stock investors is when a small firm announces that they have entered into an exclusive agreement with a larger company to perform some function or service for that company. This sort of press release is particularly important for potential investors for a number of reasons. The first is that unlike announcements which optimistically prognosticate about the future, this sort of announcement is verifiable through the partner company. For example, if ABC Internet Technologies Company signs an exclusive contract to provide General Electric with its accounting software for the next five years you can be assured that the price of ABC Internet Technologies Company will skyrocket. To verify the announcement, you can check with the more established GE who should also release information on the contract. Some of the most pertinent information will be; the size of the contract, the exit penalty on the part of GE, as well as the anticipated initial investment on the part of the Penny Stock Company. This will allow you to predict the new valuation of the company and use this information in deciding on your own plans for buying and/or selling the stock.

Another potentially windfall-esque discovery amongst Press Releases is being on the front end of those to discover a release indicating that a firm which had previously been slated to file for bankruptcy has reached an agreement with creditors to continue. The proposition of bankruptcy is a very real threat for some Penny Stocks, and as a consequence typically the price of such stocks is trading at only about a cent because if the firm goes under shareholders lose their entire stake. If a company is able to avoid bankruptcy the price will typically multiply many, many times over offering early investors the opportunity to multiply their money 10 or 20 times over in less than a day. (Not bad for a day's work, eh)

The key to understanding press releases is the ability to simultaneously act upon two contradictory thoughts. Remember that the Penny Stock market, because it is less institutionalized, is often more about predicting the emotional and erratic behavior of your fellow investor rather than simply making the next rational and logical decision based on the numbers. In this sense, it is important when reading a Press Release to consider how your fellow investor will interpret the information initially, for this will come to formulate much of the initial direction and drive of the stock. But it is also vital to consider the Press Release more meticulously. If you find that the company appears to be leaving important information out, seems to be muddling numbers and percentages, or uses any of the catchphrases for standard scams, avoid the stock altogether. Even if your' fellow investors initially drive up the price of the stock and you believe you could have been at the crest of that rising wave, you cannot be sure when the scam will hit. You can have no idea whether inside investors are planning to dump their stock at 50% 100% or even 200%. And though you may be able to earn a profit once or twice, by playing the game to can ensure that after a time you will guess wrong, sell out too late, and be stuck holding thousands of shares worth less than the paper they are written on.

Chad Pington writes about many different financial topics, but he is most interested in writing about Penny Stocks.

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Google News Updated : Sun, 20 Jul 2008 00:45:55 GMT McCain Co-Chairman, Under Fire, Steps Aside - New York Times ABC News McCain Co-Chairman, Under Fire, Steps Aside New York Times - 9 hours ago Carolyn Kaster/AP At a town-hall-style meeting Friday on energy, John McCain found himself questioned instead on his wartime positions. McCain Takes on the 'Cable Monster' and an 'Extreme' Obama Washington Post Gramm Out as McCain Co-Chair; Obama Reacts FOXNews The Associated Press - Dallas Morning News - Reuters - Boston Globe all 947 news articles Publ.Date : Sat, 19 Jul 2008 14:45:59 GMT Panel Finds Misconduct By Fusion Researcher - Washington Post Los Angeles Times Panel Finds Misconduct By Fusion Researcher Washington Post - 18 hours ago INDIANAPOLIS -- A Purdue University panel has found two instances of misconduct by a researcher who says he produced nuclear fusion in tabletop experiments. Purdue physicist found guilty of misconduct Los Angeles Times Details of what Purdue's investigation found Journal and Courier Chicago Tribune - RedOrbit - Newsweek all 157 news articles Publ.Date : Sat, 19 Jul 2008 05:47:31 GMT What's the best Oscar strategy for Heath Ledger in 'The Dark Knight'? - Los Angeles Times Times Online What's the best Oscar strategy for Heath Ledger in 'The Dark Knight'? Los Angeles Times - 1 hour ago That's a tricky Oscar question. On one hand you might think Heath Ledger should go supporting because, technically speaking, "The Dark Knight" is a film about Batman. Heath is where the heart is The Observer 'Dark Knight' sets box office record with $66.4M The Associated Press YourHub.com - New York Daily News - Chicago Tribune - OpEdNews all 3,291 news articles Publ.Date : Sat, 19 Jul 2008 23:18:18 GMT Aybar's triple caps Halos' rally over Sox - MLB.com Canoe.ca Aybar's triple caps Halos' rally over Sox MLB.com - 1 hour ago By Rhett Bollinger / MLB.com ANAHEIM -- Pinch-hitter Erick Aybar hit a three-run triple in the seventh inning, Vladimir Guerrero blasted a solo home run and left-hander Joe Saunders pitched 6 2/3 strong innings to lift the Angels to a 4-2 win over the ... Aybar's three-run triple sends streaking Halos over BoSox Sports Network Aybar's bases-clearing triple sparks Angels The Associated Press Rotoworld.com - Press-Enterprise - Boston Globe - United Press International all 506 news articles Publ.Date : Sat, 19 Jul 2008 22:52:04 GMT US banks ask SEC to expand stock trade protection - Reuters Wall Street Journal US banks ask SEC to expand stock trade protection Reuters - 7 hours ago By John Poirier WASHINGTON (Reuters) - An emergency move by US securities regulators this week aimed at curbing manipulative short-selling in some major financial firms should be expanded to all publicly traded banks, or it could erode confidence in ... SEC Short-Sale Rule Gets Negative Reviews Wall Street Journal SEC Spares Market Makers From `Naked-Short' Sales Ban (Update1) Bloomberg Forbes - MarketWatch - Taipei Times - New York Times all 582 news articles Publ.Date : Sat, 19 Jul 2008 17:02:49 GMT Growth ahead for more diversified game industry - Reuters Telegraph.co.uk Growth ahead for more diversified game industry Reuters - Jul 18, 2008 By Kiyoshi Takenaka - Analysis LOS ANGELES (Reuters) - The video game industry looks set for at least another year or two of strong growth, driven by geographical expansion, a strong hardware lineup and growing pool of casual gamers, ... Nintendo Wii Tops for Console Sales in June DailyTech Sony's press conference at E3 was a dazzling hi-tech showcase BBC News Shacknews - X-bit Labs - New York Times - Wired News all 1,145 news articles Publ.Date : Fri, 18 Jul 2008 12:07:32 GMT Venture Funding Drops for Youngest Companies As Older Ones Suck Up ... - New York Times Boston Globe Venture Funding Drops for Youngest Companies As Older Ones Suck Up ... New York Times - 1 hour ago By Abha Bhattarai In an ominous sign for Silicon Valley’s entrepreneurial machine, venture capital firms are cutting back on their investments in companies at their earliest stage of development and being forced to provide extra funding for later-stage ... VC Deals In Charts (Q2 2008)?Exits? We Don't Need No Stinkin' Exits? Washington Post Venture investments in state total $77.6 million so far in '08 Detroit Free Press CNET News - The Associated Press - MarketWatch - RTT News all 195 news articles Publ.Date : Sat, 19 Jul 2008 22:54:52 GMT RSS to HTML Increase Online Traffic

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