In the world of penny stocks, you’re sure to find oodles of great, unknown companies to invest in. But there are also penny stock scams designed to bilk hard-earned cash from investors. And usually you’ll know it’s hit you after you’ve watched your investment evaporate into thin air!
We know what to look for, and tell you who’s out there pumping stocks using paid promoters.
It’s our job to expose penny stock pump and dump scams…
And we take real pleasure in putting the smackdown on the latest penny stock pump and dump scams.
As you read, you’ll see the big red flags we’ve come across on these companies. And with all the great penny stocks out there… there’s no reason to put a single dime into any of these companies!
This week, we’re exposing pump and dump scams on two companies: Frog Ads (FROG), and SageBrush Gold (SAGE)
FrogAds operates a website to post online classified ads. Their business is modeled after Craigslist, but attempts to charge for banner ads. The company has recently retained Pamela Anderson as a spokesperson.
And that’s where the good stuff ends…
Red Flag #1: Paid Promotion of the Stock
Blue Wave Advisors, and their bullpen of pumping websites, have been paid a combined $195,000 to pump shares of FROG. The “third party” responsible for footing the bill is Lake Group Media. The problem is, Lake Group Media was the original PR firm for FrogAds. When you went to their website, you’d find a sales letter telling you why shares of FROG were so great.
Now that the website is redesigned, you can’t find any info about Lake Media Group anywhere. Coincidence… I think not!
Red Flag #2: Horrific Company Financials
FrogAds has changed their business name from Imobolis, Inc., early in 2011. But it didn’t help matters.
FROG has done nothing but spend money. Well, I stand corrected… they’ve borrowed a bunch too. Oh, and issued lots of shares. Here’s a recap from their 2011 year-end results…
- 9 month revenue of just $130
- Net loss of $184,427 for the last 9 months of 2011
- Cash fell to $27,578 from $85,359 earlier in the year
- Total stockholder equity of -$127,513
$130 in revenue won’t stretch very far over 90,000,000 shares… that’s a fact! Plus, with just $27,578 in cash on hand, how are they going to continue to grow?
Red Flag #3: The Chart Screams “Stock Manipulation”
Shares of FROG spiked temporarily, sold off, and have yet to fully recover. Check it out…
This is a classic sign of a pump and dump. Shares spike when the paid promoters are busy sending out emails… and then crash as soon as the “third party” cashes out their shares. Take note, FROG hasn’t even been trading for 6 months as of yet. And it’s already been through the pump and dump cycle.
Red Flag #4: Paid “Analyst” Coverage
If you log onto FrogAds website, you’ll find an investors tab. Instead of bringing you to a corporate contact page, or maybe a company presentation… the tab drops you on a page with a research report written by Grass Roots Research* And Distribution.
Notice the “*” after Research? That’s because they really aren’t a research company, in the after all. Here’s their disclaimer on page 35 of the report…
Further down in their disclaimer, GRRD discloses they’ve received $15,000 from a guy named Christian Mustad “for this commercial advertisement.” It’s not even a real research report…
What a joke!
Sagebrush Gold (SAGE)
Excel Global, Inc. is engaged in the design, development, marketing, sale, and support of customer intelligence applications for the front office, which includes those areas of business activity that involve customer interactions, such as sales, marketing and service.
Oh wait, that’s what the company used to do… for now they are gold explorers! Who knows what’s next. Let me explain…
Red Flag #1: The Company Has Changed Business Models More Than Once
SAGE has operated under 3 business models since 2007. It’s not uncommon for a penny stock to change business plans. And it’s actually quite common for pump and dumps to bury losses from previous businesses, in new ventures.
Here’s SAGE’s timeline…
- 2007-2009: Excel Global. Operating Software (as stated above)
- 2009-2011: Empire Sports & Entertainment Holdings. Live entertainment promotion
- 2011-Present: Sagebrush Gold. Purchased mining claims to get in the gold game
A business like this can change any number of times. Sadly, it requires actual research to find all the dirty details of a company’s past. That’s something most investors don’t bother to do.
Red Flag #2: Paid Promotion of The Stock
SAGE shares have multiple pumpers right now. Mining Stock Alerts and Shazamstocks were both paid to hype shares of SAGE. Shazam collected $110,000, and Mining Stock Alerts hauled in just $25,000.
I’ll tell you what… this penny stock needs a paid promoter, because a real analyst wouldn’t touch them with a 10 foot pole.
Red Flag #3: Horrible Company Financials
This one’s easy… I mean, they’re an exploration company. There’s a minuscule chance they’ll find anything of value in the ground. Better yet, they still need to pull it from the ground, process it, and sell it.
Plus… SAGE carries over debt from previous adventures and lives past. See for yourself…
- $0 Revenue for the first 9 months of 2011
- Loss of $93,170,078 for the same time period
- Accumulated deficit of $87,299,448… $11,290,186 of which is since Sept 2011
What’s clear is SAGE needs to raise money to keep from going under. And of course, the company keeps issuing shares and selling warrants to get the job done.
Red Flag #4: Recent Filing To Issue New Shares
On January 18, 2012, SAGE filed an S-1 document. This gives the company the right to issue 80,437,279 shares of common stock. Apparently, back in July 2011, SAGE purchased the assets of Continental Resources Group, Inc. And 76,095,215 of these shares will go to Continental to distribute to their share holders as part of the liquidation plan.
The problem here is SAGE has so many different share structures, convertible notes, warrants, and subsidiaries… it takes an advance degree in astral-physics to figure out what’s going on!
In the end, it looks like a bunch of fancy accounting to spread the debt and hide activity. What’s certain is there’s an awfully large amount of money being spent to pump the shares of a company generating $0 revenue.
Let me leave you with a one year chart of SAGE. A picture speaks volumes…
The Wrap Up:
Too many investors get sucked into these nightmare penny stocks scams. They fall for the overly-optimistic projections the paid promoters are selling. In the search of easy money, investors lose sight of what a real return should be… and end up holding the bag.
At the end of the day, the predatory practices of penny stock pump and dump scams are allowed to continue by the SEC and our government. As long as pumpers disclose they’ve been paid, everyone is willing to look the other way.
It’s the ultimate case of “let the buyer beware!”