Emblem Corp - Short interest hits almost 500,000 (EMC.V / EMMBF)

EMC has only been trading for seven calendar days, and the updated figure for short interest is only current up to December 15th 2016, so it includes just four days of trading.  The number current to that date was 483,200 and now with three more days of trading in the books it may very well be higher, and in point of fact I expect that it is higher.  

Regular readers of this miserable and pathetic little blog (I think I might be up to 4 now) know I don't give fundamental data a lot of weight, figuring it to be already 'priced in' to a stock's valuation. The reason is because most fundamental data is typically weeks, and often months old. Short interest on the other hand is much more recent, in this case its only 3 days old.  

Short interest is the one fundamental metric I follow closely because it gets right to the nuts and bolts of the market.  A stock price is determined by the laws of supply and demand, and short sellers artificially increase the available supply by borrowing shares from shareholders and then re-selling them into the market.    

One point I wish to make abundantly clear, short selling is legitimate market activity and I don't view bears as evil or anything of that sort.  Market players can look at a stock and reach the conclusion that, in their opinion, the stock is overvalued.  Expecting the price to fall they can borrow shares from the brokerages of shareholders who have margin accounts and sell them.  The goal is to buy the shares back lower, thus pocketing the difference and booking a gain.  

Longs of course do the opposite, when an investor reaches the determination, in their opinion, that a stock has potential to rise in value, then he or she can purchase shares in the hopes of selling them at some later date for a higher price than what was paid.

Pretty basic stuff.

Naturally it comes down to how many shares are being bought versus how many are being made available for sale, that's what determines the direction of the share price.  And both bulls and bears have the ability to influence the market.  When bulls storm in and buy, if they overwhelm the amount of shares available, then the price rises.  Conversely if bears are making more shares available than buyers are looking to purchase, then the price falls.

Emblem started trading on December 12th, and while market commentators were expecting it to open around $1.50 to $2 per share, instead the level of buy side interest sent the PPS up as high as $3.98 that first day on volume of over 7.3 million shares trading.

Naturally some felt that valuation was inflated, and as should be expected some obviously decided to try and profit by going short.  In just 4 days of trading almost half a million shares were borrowed and sold into the market, and based on the trading its reasonable to expect that most (if not all) of the borrowed shares were sold for more than $3 per.

Now comes the fun part.

As things currently stand short players are sitting on paper gains.  The current PPS is $2.77 and if we assume (pulling a number out of my nether regions) that shorts sold at an average of $3.27 to keep the math easy and rounding up to 500,000 as the short figure....that's a paper gain of $250K.

Not too shabby.

But here's the rub.  In order to turn those paper gains into capital gains short sellers need share holders willing to sell for $2.77 in order for them to cover.  Its the same as a long buying 500,000 of a stock at $2.77 and watching it climb to $3.27.  The long in this case has a paper gain of $250K but he can only turn it into a capital gain if he is able to find buyers willing to pay the higher price.  

Isn't the market fun?

Bears have done well, on paper, but if buying back on the cover causes the PPS to climb its possible that paper gains could turn into paper losses.  Its the same as a long buying a stock at $2.77 and then trying to sell at $3.27, if that selling leads to too much supply and a falling PPS then paper gains could turn into losses.

The thing to understand is that stocks trade on sentiment.  This is important so I'm going to repeat it, stocks trade on sentiment.  A lot of novice retail investors think that there is some magical formula or slide rule to determine whether a stock is under or overvalued.  Good luck with that.  

A lot of investors looked at a company like Tesla and saw its shares trading for $30 or $40 in 2012 and thought it was grossly overvalued.  After all the company was new and had never made a dime in profit, Tesla was bleeding cash to the tune of hundreds of millions per year.  On top of that they were issuing SEC filings saying that their previous filings for earlier years could not be relied upon because of accounting errors.  

Sounds like a short sellers wet dream doesn't it?  Hundreds of millions in losses, dilution on top of dilution, accounting irregularities.  It would be hard to argue with someone presenting the bear case on Tesla back in 2012.  But those fundamental negatives were trumped by bullish sentiment and TSLA took off trading for $100, $200 almost $300 per share in subsequent years.  And now TSLA has finally started to report profits.  Will those profits be enough to sustain the current $200 or so PPS?   That's up to the market to decide, and the primary factor will be sentiment.

But let's get back to Emblem Corp.  Right now its worth $2.77 CDN.  Is that overvalued or undervalued?  

That will depend on market sentiment going forward.  I took out a small long position on the first day of trading, because I saw (and still see) the potential for EMC to attract a lot of buy side interest. I only invested about one third of the capital I had set aside for Emblem however, because I could see it going either way after its incredibly strong opening.  

So far it has moved down from that opening day euphoria, which isn't a shock, but I also saw the potential for increased buy side interest from media mentions and the OTCBB listing, but as of yet that hasn't panned out.  With that being said I am not shying away from my $7 target by April when the Government of Canada is set to announce how its proceeding with the legalization of weed in this country.

Some interesting news has come out as well recently, with the company now authorized to produce Cannabis oils.  Oils derived from Cannabis are said to have a number of positive health benefits, and are an ingredient in some new energy drinks.  I'm invested in one such company and have written about Rocky Mountain High Brand 'Hemp Infused' drinks on here a couple times after opening a position in RMHB at .031 cents USD on the OTCQB.

http://www.avoidthebag.com/2016/10/hemp-infused-beverages-intriguing-idea.html

I am very bullish on EMC as a long term investment, given the management team and the expanding market.  Short term though anything can happen.  If bears continue borrowing shares and selling them the PPS could continue dropping.  

For those concerned with their shares being loaned out there are some things you can do, although personally I don't think it matters much because in my opinion there will still be plenty of shares available in margin accounts.  But shares held in registered accounts for TFSAs and RSPs, those shares are not available to short players.  Additionally putting a sell order in means they can't be loaned out either, although that's something you need to keep an eye on if your intention is to hold for the long term as your PPS could be hit if the stock starts to climb.

Anyway that's enough for now.  Good luck and realize that because of my long position my views are obviously biased.  Verify all information, while I try to ensure the accuracy of what I share I can make no assurances, mistakes can happen.

Cheers

Ziopharm - Has Kirk lost his magic touch?

Its something you see all the time in professional sports, a player with a successful history hits the free agent market and gets a huge contract.  Teams sometimes overpay, and then get stuck with a grossly overpaid player who isn't performing.  Its a lousy situation but it happens, and the team that overpays is stuck, often unable to trade the player unless they're practically willing to give him away and pay a portion of his salary.

It happens in the stock market too.  Many Ziopharm investors were thrilled with the involvement of renowned biotech Guru RJ Kirk.  Here was a guy who had orchestrated some blockbuster deals with companies like Scios and New River.  Kirk was a big home run hitter in other words, and when Ziopharm announced it was partnering with the MD Anderson Cancer Centre the bidding on shares of ZIOP went through the roof.  

After trading down around $2 in 2014, the PPS climbed up near $15 in 2015 with the Anderson deal providing the wind in the sails.  Now of course ZIOP is down to somewhere around $6 to $7 and running out of cash with the prospect of more dilution within the next 12 months.  

RJ Kirk is also the Senior Marketing Director and CEO of Third Security, an investment firm he started in 1999.  In viewing the biotech and science centred holdings of Third Security its apparent Ziopharm isn't the only one that has not been performing as well as investors were probably hoping.

http://www.nasdaq.com/quotes/institutional-portfolio/third-security-llc-874451

1. XON up near $70 in 2015, now its trading under $30   
2. HALO up around $25 in 2015 now under $12
3. FCSC over $7 last year now less than $1
4. SYN briefly over $4 in 2015 now less than $1
5. OGEN same as SYN
6. HSGX started 2015 around $12 and is now under $2
7. TBIO got up to $3 and even $4 in 2015, now around 20 odd pennies.  

That's just a sampling of course.  It perhaps goes to show the wisdom of that oft repeated bromide about past performance being no guarantee of future success.  Its not just in pro sports that players lose their touch.  

But in fairness just because a number of stocks have under performed in 2016, that doesn't mean they can't turn it around in 2017 and beyond, in fact I'd expect at least one or two of those beaten down stocks listed above to rebound.  

Who knows, Ziopharm could be one of them.  In my opinion a lot will depend on their ability to raise money yet again, and if it involves diluting current shareholders, then to what degree.

Good luck

Peregrine Pharmaceuticals (PPHM) January effect candidate?

I've written before about investors falling in love with their stocks.  That doesn't just go for the winners, people fall in love with those that have lost them money too.

Nobody wins them all, I don't care how good you are.  Anyone who believes someone who says they never pick a losing stock, they probably believed Donald Trump's promises about locking up Hillary Clinton and draining the swamp.

Sometimes the loss is blamed on manipulation, but whatever the reason investors have often read all the SEC filings, every PR, all the Motley Fool and Seeking Alpha articles. Message boards have been scoured looking for that golden piece of bullish information that preaches to the converted longs.

But as the year comes to a close, sometimes you have to cut bait and let go, especially if you have gains with other stocks.  Capital losses have value because they can be used to offset gains that have been booked on other stocks.

Still, letting go is hard, and that's where the January effect comes in.

A lot of investors will hold on until late in the year, before finally hitting the sell button in December and booking the capital loss.  But that doesn't mean they stop paying attention to the stock they sold, its still watched closely.  And then after 30 days many will buy back in.  That 30 day period is important because buying back in after less than 30 days means you lose the capital loss for tax purposes.

The result of buyers coming back into a stock is frequently a bounce in the share price.  And sometimes it starts in late December as some who never held a position buy in looking to play the January effect with a beaten down stock.

Fundamentals aside stocks trade based on supply and demand more than anything else.  Obviously the best time to be buying any commodity is when demand is low, and the best time to be selling is when buyers are in abundance.  If many of those who sold for a tax loss storm back into a stock in January, that represents a good time to sell, at a time of heightened demand.

So what makes PPHM a good candidate for the January effect in my opinion?  Let's start with the a look at the chart:

The share price for PPHM cratered in late February 2016 with the announcement the company was halting it's phase III trial of Bavituximab, causing the PPS to fall from over $1.00 to 30 odd cents. For the remainder of the year the stock has been trading in and around 30 to 40 cents with some short lived spikes above 50 pennies.

Obviously anyone who'd bought shares before the trial halt would be sitting on a paper loss, and selling would allow investors to book capital losses to be used as an offset against capital gains.  But now the question is:  Why would anyone want to buy back in?

I see two reasons, the fist being Avid Bioservices, Peregrine's wholly owned subsidiary.  Their contract provider of bio-manufacturing services (as well as providing services for their own development stage drugs)  just reported 2nd quarter revenues of $23.4 million with a reported backlog of $73 million.  According to recent news, with Avid's continued revenue growth, overall profitability is targeted within the next 18 months.

http://finance.yahoo.com/news/peregrine-pharmaceuticals-reports-financial-results-210500133.html

And the second reason is also outlined in the above linked PR on the company's financial results. Their drug candidate Bavituximab, while it failed the futility analysis in the company's phase III trial, post hoc analysis of the results may lead to the company finding alternative targets and/or combinations.  

Finally I will bring up short interest, because I consider a critical point of research and DD.  Back in February, before announcing the phase III futility test failure, short interest was over 11.4 million.  As recently as June the number of shares borrowed and sold was still over 9.4 million.  Subsequent to June though the number of shorted shares dropped substantially with the most recent update showing 646,318 shares short current up to November 30th 2016.  

http://www.nasdaq.com/symbol/pphm/short-interest

Props to short players who booked some solid gains by selling high and buying back low on the cover.  Now with less than 1% of the float short as of the most recent update, I don't see much of a risk/reward play for short players.  Shorting a stock trading for 30 to 40 cents is fraught with risks, especially if the company achieves profitability and/or success with bavituximab.  

We shall see if PPHM does benefit from the January effect.  If it does, then the safest thing to do in my view is to book profits.  As I write in just about every entry on this blog, "nobody ever goes broke taking profits".  I do think there is a potential for PPHM to deliver over the longer term, but as with any stock, there are risks.  If PPHM does bounce in January and then keeps going, those who sold for the January effect could always cry into the money they made.

As always, not a recommendation, just my thoughts and opinions.  Comments are welcome, just no profanity please.  

Good luck

Worried about rising interest rates? Don't be.....

Interest rates affect everyone, whether you're a borrower or a saver.  For borrowers rising rates mean higher carrying costs on debt, for savers it means higher income on vehicles like savings accounts and GICs. 

But in terms of the stock markets there is quite often a disconnect, with retail investors bullish when rates go down and bearish when they rise.  There is some logic to that thinking, because when rates go up so do things like the cost of buying on margin.  And when rates go down, those using leverage to purchase stocks see those costs drop.

But rising rates should be cause for bullish excitement, while falling rates should spark concern.

Quite simply central banks raise rates when the longer term outlook for the economy as a whole is good, and they lower rates when there are fears of recession, or when a recession as already taken hold.  What good are cheap borrowing costs when there are less people working and less money circulating in the economy? Conversely, who cares if the cost of borrowing is more expensive if that means there will be more money circulating as employment levels rise along with those working getting increased wages.

For younger readers though, those who have come of age in the last 10 years or so, rising interest rates might come as something of a shock.  This was only the second rate increase in the past year, and it signals that we're coming out of the emergency low interest rate environment that was spawned by the Great Financial Crisis (GFC) in 2007/2008.  

There are a generation of borrowers who think a fixed mortgage rate of under 3% is normal.  When I sat down with my bank a couple years back to negotiate a mortgage I had a different term, "stupid cheap".  My wife was thinking of shaving a few tenths off by going variable, and maybe buying the rate down some.  But at well below 3% I was more than happy, being able to remember rates much higher, like 5, 6 and 7.....there were even crazier rates back in the early 90s, but I wasn't taking out mortgages back then.

Rising rates will cause some problems, there are some people who are addicted to cheap debt, and they're going to be in for some severe pain if the US Federal Reserve sticks to its guidance of another 3 rate increases next year.  

But for the overall economy in general, and stock markets in particular, this is a very good thing.  

Aurora Solar (ACU.V) explodes higher on LG Electronics news

Many commentators write about the importance of timing the market.  But sometimes its not so much about timing, but rather of "time in".  I first wrote about ACU.V back on July 18th of this year, just shy of five full months ago.  At that time ACU was trading around 15 cents:

The lure of green energy - Aurora Solar Tech (ACU.V)

In that posting I expressed a bullish opinion that was based on a near total absence of Promotion, News, and Hype.  On top of that I really liked the way the chart was setting up.  I saw a base pattern in the 14 to 15 cent range and had started a position at 15 cents and speculated that the stock might be undergoing smart money accumulation, that is to say big market players buying low while things were depressed and quiet.

Not long after I wrote that blog posting, the PPS fell to less than 10 cents, so much for timing.  I did take advantage of that drop and added the exact same dollar amount as I had bought at 15 cents, thus lowering my cost average to 12.5 cents, but at 9 or 10 cents I was still underwater.  

In Sept/Oct/Nov the PPS did recover, getting back up around 15 cents before settling in and around 13 pennies.  That is until December 13th when the company released news about an order from LG electronics.  

https://ca.finance.yahoo.com/news/aurora-solar-technologies-announces-volume-130000686.html

The two sentences of news contained in that release seems to have been the cause for an explosion in both the PPS as well as volumes.  ACU traded more than 8 million shares over the last two days and the PPS climbed from 13 to 19 cents after reaching an interday peak of 21.5 cents.  

Regular readers know my favorite saying, nobody has ever gone broke taking profits.  I myself sold 10% of my holdings today at 20 cents, 60% gains are nothing to sneeze at.  But I think there is potential for even more upside here.  With that being said, ACU has moved up in a fast and furious manner, so it would not be unreasonable to expect a pullback.

Do take note of the 50 and 200 day moving averages (simple), the 50 is taking dead aim at crossing over the 200, which is called a Golden Cross among devotees of Technical Analysis.  A Golden Cross can be seen as a potential harbinger of a clear sky break out to a new and higher trading range. Assuming ACU.V does break out even higher I think it is reasonable to expect resistance in the 30 to 35 cent range where the PPS traded for a long time over the past several years.

As noted in a blog posting I just did on short interest on December 5th just past, ACU.V only had 2,000 shares sold short current up to November 30th.  However back in August that number did shoot up over 100K, which in my opinion was quite likely an effort to "shake the tree".  For those unfamiliar, shaking the tree involves shorting a stock in an effort to shake free shares from overly nervous and price sensitive retail shareholders.

If it happened before it can happen again.

Do note my opinions are biased as I am a shareholder and ACU does represent a highly speculative stock, that was true at 10 cents, at 15 cents and is equally true at 19 or 20 cents.

Good luck

Will Emblem Corp follow Lithium X Energy's trajectory? (EMC.V)

What does a Junior Lithium mining company have to do with a producer of Medical Marijuana? 

Generally speaking, practically nothing.  But when it comes to comparing shares of LIX.V with shares of EMC.V I think the similarities will show up in the weeks and months ahead.  

In educational circles its called applied learning, taking knowledge acquired from one area and applying it to another.  In this case I'm taking the lesson of the surge in Lithium Stocks and applying it to the MMPR space.  Specifically I'm taking what I learned about the trading in LIX.V and postulating that it may very well serve as a guide about what to expect for trading in EMC.V.  

Lithium X started trading on November 30th 2015 and opened at 30 cents per share.  After forming a solid base around 40 cents and trading in that area until mid January the PPS took off.  By April of 2015, just 4 months after opening at 30 cents, the PPS was trading over $2.50

Oh to have a time machine eh!  Here's a chart that covers that first five and a half months of trading in LIX.V

I didn't jump into LIX.V because I thought the Lithium buzz was pretty much done.  I banked some very nice profits on Lithium stocks like Nemaska, Lithium Americas and even Durango, but I stayed away from LIX.V because at that time they looked, (to me) to be getting too much promotion and all the hype that goes along with it.  

Live and learn.  Investors loved the Lithium X story and in particular the history of their management team.  

The lithium buzz in general and the Lithium X story in particular, was too hard to resist and LIX.V took off.  Stocks, as I have often written here, are more about psychology than anything fundamental. If I could go back and invest in LIX.V for 40 cents I would, obviously.

But wait.  Maybe I do have a chance to do it over again.  But instead of with a Jr Lithium miner I can do it with a newly minted Medical Marijuana company, Emblem Corp, which just started trading under the symbol EMC.V

A big part of the reason Lithium X Energy took off in my opinion was because investor's liked the track record of their management team, which had (and has) a wealth of experience in the mining sector.  Executives whose histories include established and successful companies like Potash One and Albemarle obviously give a level of comfort. 

Emerald has a similar narrative with their executive team.

Notably John Stewart, who used to run Purdue Pharma, the privately held pharmaceutical giant best known for pain medications like OxyContin.  And Harvey Shapiro a former CEO of Dynacare Inc which was acquired by Laboratory Corp of America Holdings in 2002.

Like the Lithium buzz that sent many Jr Miners soaring with gains of several hundred percent and sometime over 1,000%, medical marijuana is equally hot right now.  And I believe that Emblem may very well be coming to the market at an incredibly opportune time, just as LIX.V did in November of 2015.  

In fact the timing may be even better.  Not only is the MMPR space hot right now, but the overall markets have been in full bull mode since the U.S. presidential election.

Shares of EMC.V were expected to open somewhere around $1.50 but when I finally was able to pull up a quote this morning the PPS was already up around $3.  And while I think that price is reasonable and has a lot of upside potential, with the hype surrounding MMPR in general and EMC.V in particular, I have decided to hold off in anticipation of some volatility.

Why do I think there's a lot more upside, even at $3+?

Sticking with Lithium X Energy as my point of comparison, I think Emblem can attract even more attention because of all the news around Marijuana right now.  Yes Lithium got some attention in the media, but nothing compared to all the stories coming out about legalization right now.  And I think Emblem's path to revenues and profitability could be much shorter. 

Lithium X Energy, over a year after going public, is still in the development stage, they haven't yet reached production.  In fact they still haven't published a feasibility study on their proposed mine in Argentina.  I'm not pointing that out to be negative, its merely a fact of the mining game, it takes years to bring a proposed mine to production, and many fail.  That hasn't stopped Lithium X from raising capital however as investors continue to believe in the company as evidenced by their market capitalization of roughly $130 million Canadian.

Emblem by contrast already has their license form Health Canada and was recently written about by Huffngton Post Canada:  

An Inside Look At One Of Canada's New Licensed Cannabis Producers

Add in the fact that the rules around legalization for recreational use are expected in Canada this spring and I believe there is a recipe here for what may turn out to be a perfect storm.  

I could write reams and reams more on the reasons for my bullish opinion and why I'm looking to take out a long position, but I'll leave readers to do their own research and further due diligence if they're sufficiently intrigued.  

I will note that Emblem hit my radar via a promotional email, the same type of promotion that caused me to stay away from Lithium X Energy.  Again, live and learn.  Some promotion with development stage companies is to be expected of course, and I will be watching to see if Emblem "jumps the shark" in my estimation by going overboard.

Despite my bullish opinion please understand there are always risks, and as someone looking at taking out a long position my opinions are obviously biased. Small and microcap companies fall into that high risk category and are not suitable vehicles for everyone, there is every possibility that investors could lose some or all of the money they put at risk.  I strongly advise consulting with an investment professional to determine if EMC.V is suitable considering both investment objectives and tolerance for risk.

Comments are always welcome and good luck.

More Sunday Thoughts....Pay it forward

As my multitude of regular readers know, (yes, that's both of you) on Sunday's I sometimes like to write about those things that daze and amaze, astound and confound, the games that both amuse and confuse retail players in the equity markets.

On occasion I also write about my Christian faith and my Church.  You can relax, I'm not an evangelical, nor am I one who takes every word of the Bible literally.  I don't knock on doors and I don't give my testimony on street corners.  

My Christian faith is pretty simple, and it centres on the Golden Rule that pretty much all religions proclaim in one form or another:  "Do unto others as you would have them do unto you".  Its a rule that isn't even exclusive to those of faith, many atheists and agnostics follow this maxim as well.

The market however does not ascribe to this principle.  In the capital markets the axiom is more one of: "Do unto others BEFORE they do unto you".   The market is a zero sum game.  In simple terms that means you have to decide between one of two options, cash or shares.  When a trade takes place one party gets shares and the other gets money, you can't have both.  

And with so many hyped up plays out there, stocks trading on promise and hot air, there will be a lot of people who end up heavy on shares and light on cash.  My goal with this blog is to help retail investors better understand the game and to make better decisions so that they can win more often. But winning in the market game means others are losing.  

I wrote recently about a marijuana stock that was being pumped and promoted, one that went from about 2 cents to up around 36 pennies.  Its now trading somewhere around 15, and in my, (not always so) humble opinion it will eventually find its way back to 2 cents because it is fundamentally worthless with no financial foundation to support any valuation.  

If you manage to make money on a penny stock, (or any stock for that matter) I simply ask you to consider paying some of the money you made forward.  My church is pretty awesome, we sponsor refugee families and migrant workers who come to our area.  We have a free community dinner once a week, support the local food bank and the Church has its own clothing depot.  

This blog earns some money, not a lot but some.  The ads on here have generated some cash which finds its way to my Church, as do some of my trading profits.  When I am winning with my trades I know that there are others who are buying into the forward looking pumps.  And I also know that many will never sell.  Overcome with greed many players are too afraid of leaving profits on the table, and then too proud to admit a mistake and take a loss.

Buy yourself some Karma and consider paying some of it forward.  And keep an eye here on Monday, I'll be writing about a new Marijuana IPO, Emblem Corp.  

Happy Sunday everyone, and Merry Christmas.  

Xenith Bankshares - (XBKS) Consolidating from a position of strength

I first wrote about a company that is now called Xenith Bankshares back on May 11th 2016 before it merged with and into Hampton Bankshares (HMPR).  

http://www.avoidthebag.com/2016/05/hampton-roads-bankshares-hmpr-great.html

Post merger holders of HMPR were not affected, the number of shares they owned after the merger were the same as before.  Holders of Xenith were given (if memory serves) 4.4 shares for each one share they held of the old XBKS.  Post merger the name for the combined company was changed to Xenith Bankshares and it resumed trading under Xenith's ticker symbol XBKS.

Clear as mud?

Back in May the shares were trading around $1.80, and today they're worth $2.50 as of the close on December 7th 2016.  That's almost a 40% gain in just over 6 months, so not too shabby.  Of course that pales in comparison to many hyped up, speculative companies. But then it also hasn't been the roller coaster ride you often see with those riskier plays..

Not a bad looking chart, covering the period from when I first wrote about it on this blog to the present, but enough patting myself on the back.  

Shareholders recently approved a share consolidation which will take effect on Tuesday December 13th with every 10 shares being converted into 1 post consolidation:

http://finance.yahoo.com/news/xenith-bankshares-inc-announces-reverse-211604435.html

There can be different reasons for a company to enact a share consolidation, some good and some bad.  Often when its a company listed on a more senior exchange like the NYSE or Nasdaq a reverse split is employed to bring a company's stock back in compliance with the rules of the exchange.  

You see it all the time with stocks trading for less than a dollar over a protracted period of time. Exchanges like the Nasdaq have a minimum bid price requirement of $1.00 so a stock trading for less than that will often consolidate to lift their share price.  However at $2.50 that obviously isn't the issue for Xenith Bankshares.

Other times a penny stock will do a reverse so that the stock can be uplisted off the OTC markets and onto a more senior exchange like the Nasdaq.  A couple of stocks I've written about here have gone that route, SBOT and VUZI specifically with consolidations of 10 and 75 to 1 respectively.

Obviously though neither of those two rationales apply to Xenith.  They don't need to maintain compliance and they're not seeking to move off the Over The Counter market.  So one might reasonably ask: "Why bother"?

I can think of a few reasons.  At $2.50 (or thereabouts) per share XBKS qualifies as a penny stock in many eyes, there are investors who view any stock trading under $5 to be a penny play.  With positive earnings of $0.77 for the trailing twelve months according to WSJ.COM and a piddly little PE ratio of just 3.23 as per the same site, it doesn't look like the markets are showing XBKS much love or respect. 

With a 1 for 10 consolidation the PPS will be up around $25 per share assuming the PPS maintains its current level.  I believe that they will then have the chance to attract more serious investors, those who shy away from stocks they view as Penny Plays.

I can also envision XBKS attracting more institutional interest, although with current institutional ownership at over 56% they're already doing well in that regard.  Short interest will not be affected directly, current up to November 15th 2016 the number of shares shorted was 1.94 million, not even 2% of the float.  Those shorted shares will also consolidate post consolidation, bringing the number down to about 194,000.  

As I've written before on my other posts about Xenith/Hampton I believe the biggest potential catalyst comes with a return to paying dividends.  If they can start paying shareholders in regular distributions I can see their PE ratio climbing to something more in line with the standard in the banking sector, somewhere around 20.  

One last thing to take into consideration is the fact that this consolidation will result in "odd lot" holdings for any shareholders who own shares in increments of 100.  For every 1,000 shares held before the reverse, they will become 100 shares post consolidation.  However 100 shares will become 10.  This could be important depending on an individual investor's time horizon and level of investment experience in my opinion.

Someone holding 500 shares pre-consolidation will have 50 after the split, and 50 is what is called an "odd lot".  If someone goes to sell an odd lot (anything not in 100 share blocks) their order goes to the back of the line so to speak.  

Its something to consider for those who will end up with shares numbering in the tens instead of hundreds, or thousands.

That's it, I'm a shareholder so view my commentary in that light and verify all the information provided.  While I would not willingly post false information I am human and am more than capable of making an error.  Comments are always welcome and good luck.  

Short Interest update on (RVX.TO) (ACU.V) (KUB.V) And other thoughts

I have written often about the reasons I view short interest as an important part of my research. Short interest is of course fundamental data, but rather than being weeks or months old, with the Canadian listed stocks I hold I am able to get updates twice a month, and when the new numbers come out its only 3 days old.  

I've shared these views before, but I believe they bear repeating.

In my younger days I viewed bears as an enemy to be defeated, I dreamed of short players being forced to cover off large positions resulting in a squeeze play that would send a stock sky rocketing. I long ago consigned that view to the trash bin.  My older and wiser self knows that it is never wise to underestimate an opponent, that holds true on the battlefield, in a sporting arena and with the public equity markets.

Short selling comports huge risk.  When going long the amount that can be lost is fixed, if you buy 10,000 shares of a stock trading for $1 the most you can lose is $10,000 because a stock cannot drop below $0.00.  

But go short 10,000 shares on a stock trading for $1.00 and the potential for losses is theoretically limitless.  Those 10,000 shares borrowed and sold into the market at $1.00 have to be bought back on the cover, unless the PPS goes to $0.00 in which case the short seller books $10,000 in profits less fees.  

But if the stock climbs, then the potential for losses climbs.  At $2.00 a short seller is down $10,000 at $3 he's down $20,000....and keep adding $10,000 for each dollar the PPS climbs.  And if  the stock keeps climbing, then the short seller must keep putting money into his margin account to protect his short position.  

If the margin requirements are not met then he can be forced to cover.  Can you imagine being short 10,000 shares at $1 on a stock that goes to $10?  The short seller could be forced to buy back his short position for $100,000 when the short sale only netted $10,000.

It is because of this kind of risk that short sellers like Hedge Funds are notorious for going full tilt on their research and due diligence, with reports of some even combing through the trash of public companies to get the inside scoop.  And it is because of this that I now stay away from investing in companies that have a significant number of shares shorted, say 10% of the outstanding or more.

Of course there are a couple other reasons for going short.  One is fairly benign.  Market Maker broker dealers (MMs for short) that are quoting a bid and ask have an essential function in the market, they provide liquidity.  A lot of stocks out there are thinly traded, but because of MMs those looking to buy can always find a seller, and those looking to sell can always find a buyer.  Because of this essential function MMs can end up short, not because they're bearish on a company but simply because they got hit with buy side interest when no sellers were available.

The other reason is less benign, its sometimes referred to as shaking the tree.  A major player can work a stock up and down by using short selling when a stock hits the top of his buying range.  This can increase volatility and cause some longs to bail out, allowing the big player to accumulate a large position, covering off his short sales and then adding to a position.  In this way short selling can actually be seen as a positive.

Alright, that's enough preamble.  Now onto the three stocks mentioned in the subject line:  RVX, ACU and CUB all traded in Canada.  I have written about all three before here at ATB, and both RVX and KUB are up significantly since I first profiled them here, while ACU is down a couple of cents. 

Please note that I have long positions in all three of these stocks so my opinions are biased and should be viewed in that light.  

Resverlogix: RVX.TO or RVXCF OTCBB

Up to November 30th 2016 shares shorted is listed at 107,542 which represents 0.10% of the 105 odd millions shares issued.  You would have to go all the way back to July of 2015 to find a higher number.  As recently as May of this year the number was just 1,500 and it has been climbing almost non stop ever since, but only incrementally, one tenth of one percent of the outstanding is hardly a massive number.

With RVX I consider it very possible that short selling is being used as a means to "shake the tree", to push the PPS around in other words in an effort by smart money players to accumulate on a long position.  

The company just put out news today (Monday December 5th, 2016) announcing a second positive recommendation from the Data and Safety Monitoring Board (DSMB) for the continuation of the company's Phase III trial of Apabetalone called BETonMACE.  The first patients were dosed over a year ago now and the DSMB noted no safety or efficacy concerns and recommended the trial continue without modifications.  

BETonMACE is attempting to show that Apabetalone will reduce the incidence of Major Adverse Cardiac Events (MACE) in patients suffering from Diabetes Mellitus, which is a fancy way of saying full blown insulin dependent Diabetes.  

Here's a link to that news:

http://finance.yahoo.com/news/resverlogix-announces-second-positive-recommendation-171300385.html

Aurora Solar Technologies: ACU.V or AACTF OTCBB

Short interest for ACU is so low it might as well be 0, although the actual number is 2,000 current up to November 30th 2016.  That's only 0.01% or one one hundredth of one percent of the roughly 39.6 million issued shares.

Trading in this stock has really thinned out, and there hasn't been any news of any consequence since October when the company announced a repeat order from one of their customers.  

Cub Energy: KUB.V or TPNEF OTCBB

KUB on the other hand does have some short selling going on, like RVX not a huge amount by any stretch, but enough to be noteworthy in my opinion.  Up to November 30th 2016 the number comes in at 146,400 which is 0.05% of the roughly 312 million issued.  

Again, its not a lot, and as with RVX I consider it very possible that short selling is being used as a means to shake that proverbial tree in an effort by some smart money players to accumulate.  Back in October the number climbed over 200,000 but then came down in subsequent periods to just 23,000 and then 16,000 before this most recent update took it back up to 146,000.

Cub Energy has basically no news, the last PR of any note was on November 16th when the company released its 3rd quarter numbers.  And unlike RVX and ACU volumes for KUB are much more robust, it has traded at least 1 million shares per day over the past 4 sessions and traded over 14 million shares on November 17th, the day after they released their quarterly results.  November 17th saw the PPS close at 3 cents, the most recent close was 5 cents and that is just .005 from the 52 week high.

Summary

Taking everything into account I think RVX presents the biggest possible upside if they succeed with their Ph III trial, but it could be a long wait and there is a big risk that their trial could ultimately fail.

ACU appears to be a stock that is drifting right now.  Its a stock that has seen significant volumes taking place in quick bursts every two to three months, the last one being in late October.  If the pattern holds it would be January or February before the next one.  However I have to wonder if the election of Donald Trump hasn't taken some of the wind out of the sails in the New Energy space.

KUB I believe presents the best prospects in the very near term, that is based on the chart, on the fact there is precious little news, no hype and zero promotion that I can find.  Should those elements come into play I think there's a great narrative here given that Cub Energy is focused on the Natural Gas market in Ukraine, and with the conflict in that region subsiding I very much like the chances of KUB.V returning to the levels it was trading at back in 2013, that is in the 20 to 30 cent area.

Comments are always welcome, just keep the language polite.  

Cub Energy (KUB.V - TNPEF) Approaching a 52 week high

I first wrote about Cub Energy a little over a month ago on October 31st, Halloween as it turns out.   And that seems rather fitting because this obscure little Canadian listed penny stock has been quite the monster over the past month.  Near the end of that post I said I might revisit KUB  if the PPS took off.  

Well given that the PPS has nearly doubled I think I've earned a self congratulatory pat on the back. If you want to read that original post here it is:  

"An intriguing penny play - KUB.V - Ukrainian Oil and Gas".  

As it says in the subject line KUB is now approaching its 52 week high.  This past Friday the stock touched 5 cents before closing at 4.5 pennies.  If it hits 5.5 cents it will have reached that 52 week high, and obviously anything above 5.5 will represent a new high.  Here's the 1 year chart. 

That's a pretty spectacular jump in a short period of time.  Up until mid November shares were available on the ask at 2.5 cents, and anyone lucky enough to get filled at the bid was buying at 2 cents.  This past Friday the bid was at both .04 and .045 cents....offering a chance at gains in the neighbourhood of 80 to 100%.  

There's a common saying with penny stocks, "greed kills", so I will not begrudge anyone for taking their profits and running.  As I write in practically every other blog posting, nobody ever went broke taking profits.  

I will however admit to being greedy here and holding on tight.  I am currently a shareholder, that is to say I do eat my own cooking.  But that also means my opinions are biased so please view them in that light.  I will of course explain the reasons why I continue to be bullish on KUB.  

The biggest reason is volume, or rather a lack of volume.  Since KUB began its climb off that 2 cent low on November 16th there has only been one day with volume of over 2.5 million.  That day was November 17th, the first day KUB moved off that 2 cent base, when roughly 15 million shares traded hands.  However 15 million isn't a huge number when you consider the amount of money it represents with a stock trading for a couple pennies.  

15 million shares trading at 2.5 cents equals $375,000 CDN, which is not insignificant, but we're not talking millions of dollars either.  And as I mentioned, since that day to present volumes have not once crested 2.5 million.  Even two and a half million is only around $100,000 CDN at 4 or 4.5 cents.

So what has caused KUB.V to lift off that base of .02 to .025 cents and move into the .04 to .05 cent range?  I think the reason is quite obvious, its due to the release of their Operational and Financial Results for the 3rd Quarter which came out on November 16th, one day before the volume surged.  

http://finance.yahoo.com/news/cub-energy-inc-announces-q3-210507800.html

The release spoke of an improving cash position and the decrease of royalty rates for natural gas in Ukraine.  That news saw a jump in both PPS and volume, but most importantly, since that time the PPS has not returned to that base level of 2 to 2.5 cents.

Regular readers know that I keep an eye out for what I consider to be the "Unholy Trinity" of the markets: Promotion, News and Hype.  Cub Energy has not issued one PR since their quarterly update and you'd have to go back to August to find one previous to that.  That's a far cry from the typical penny stock news machines where at least one PR per week is the norm.

In terms of promotion I have found zero, nada, nothing, zilch.  

I have commented often that some promotion with penny stocks is almost to be expected.  However the only item I am able to find which even has a hint of promotion to it is a Streetwise.com report from back in April of this year with some guy named Chen Lin explaining his reasons for being bullish on KUB.V

https://www.streetwisereports.com/pub/co/5223

There is precious little news, no recent promotion that I can find, and certainly no hype.  However that isn't surprising given that KUB is still trading between .04 and .05 Canadian cents.  Yes that is a big jump in percentage terms when measured against recent lows, but the Market Capitalization here is still not even $12 million in USD.  That's a far cry from 2013 when both the MC and share price were 400 to 500% higher than they are currently, with the number of outstanding shares roughly the same as it is now.

Should KUB's share price return to that 20 cent level, I will be keeping a keen eye out for promotion and hype.  Its not unusual to see a stock being pumped and promoted after it gains 1,000% or more off its lows.  If the PPS does make those kind of gains I will be hopeful that the increase can be sustained, but I will not be naive if I sense the dinner bell ringing calling the herd to the trough.

2 cents to 22 would represent a 1,000% jump off the low. 

Again, I have a long position in this stock so view my opinions and commentary in that light.  Verify everything I have written and realize that an investment in a penny stock comports significant risks. My tolerance for risk and investment objectives may differ from your own.  An investment in KUB could result in the loss of some or all of the money put in play.

Good luck.

Beware penny stock Marijuana Pump & Dumps - Learn the art of war

Marijuana hype is bubbling again thanks to a number of U.S. states voting to legalize recreational use and with Canada poised to do the same this coming spring.  No doubt there will be some long term winners, but as with any bubble they'll be few and far between.  And even those that do win, the payoff is not going to be as monstrous as many believe.

Why is everyone so excited?

Marijuana as an illicit industry is worth more than $100 billion in North America, so the thinking goes that growing operations stand to cash in huge thanks to legalization.  

Slow down Cheech, put down the Doritos and think for a minute.  

Pot in Canada alone is expected to become a $10 billion a year industry, but only a small portion of that money will end up in the hands of growers. After the crop is harvested it has to be processed, then it has to be packaged, next comes distribution and then retailing.  Oh, and let's not forget the tax man.

All those expecting Cannabis grow ops to be gold mines, they're going to be disappointed.  Some will be profitable, some.....But they'll have to manage their business well in a highly competitive environment. 

Its a bubble, and as with all bubbles there are a multitude of Penny Stock promotions going on right now trying to cash in on the hype.  Its no different from the Dot Com days when worthless companies put a .com at the end of a word and saw market capitalizations explode beyond anything that could reasonably be supported by financial reality, check Pets.Com for reference.

So how do retail investors get roped into these hyped up plays?

Simple, the professional industry players who prey on greedy retail investors understand something the amateur retail crowd does not.  The pros understand "The Art of War" and the herd doesn't.  On top of that the industry players have tools at their disposal to tilt the playing field heavily in their favor with perfectly legal deceptions that many individual traders don't even know about.

First things first though, understand that the market game is a war.....and everyone is battling over the same objective, money.  "The Art of War" was written about 2,500 years ago by Sun Tzu, a Chinese military leader, and the precepts he laid out in the 5th century BCE are still true today.  They have been applied to arenas beyond the battlefield, into the business world and of course the public equity markets.

Sun Tzu taught that the key to war is deception, and he set out a number of rules, including these:

• When you are weak you must appear strong
• When you are strong you must appear weak
• When your force is far away they must appear to be close
• When your force is close they must appear to be far away

I think readers will get the point.  These rules can be transferred to the stock market quite simply and broken down in to two key points that the Smart Money industry players know very well.

• When wanting to sell you must appear to be wanting to buy
• When wanting to buy you must appear to be wanting to sell

Alright, now for another key concept that has to be understood when it comes to warfare, and that is to know your enemy.  Let's look at things from the perspective of a penny stock company engaged in growing marijuana and looking to cash in on all the hype by getting investors excited and buying their stock.

Firstly you need to be publicly traded, and that can be a lengthy and difficult process.  You have to satisfy regulators that you have a potentially viable business and there are significant costs involved in an Initial Purchase Offering.  If you seriously believe your company is going to have a shot at being a long term success, then this might be the best option.  On the other hand if all you're looking to do is cash in on some hype, it would be easier to avoid all the scrutiny and expense by going public via a reverse merger with a publicly traded shell.  

If you don't understand that, then do some research and get reading.  

Companies that enter the market via a reverse merger into an empty shell company, you're likely going to have a stock trading at somewhere around one single penny because an empty shell has no business.  Now that has changed, so informing some investors who are willing to risk some capital should get some trading happening and get the share price up, maybe to a nickel or so.  That jump from empty shell trading around one penny to an operating business trading around a nickel will likely attract some attention, it won't take much to get the PPS up to maybe 10 or 15 cents.

Now we're ready for some fun.  Still with me?

Now you need some attention, you need retail investors to at least put your company's ticker symbol onto a watch list.  For Cannabis/Marijuana companies there are a number of newsletter services and promotional outfits that will get the word out.  It'll cost some money, maybe $10 grand or so for each outfit you hire, but if things work out a big pay day is coming, ya gotta spend money to make money after all.  Besides, if the promoters like the potential some will take payment in stock.

Okay, so now you're pretty much set.  You have your shares ready to sell, just pulling a number out of my nether regions we'll say you and your associates have 50,000,000 shares ready to be sold. Shares you've issued to yourself as compensation, those you picked up cheap after the reverse merger before the market woke up, others via warrant exercises and such.

Now all that is needed is some professional industry types to sell them.  Your job will be to issue some news, something that sounds really good.  You don't have to lie, you just have to be well schooled in the art that is called hyperbole.  For those who don't know the meaning of hyperbole, basically its meaningless words that are made to seem meaningful.  

Still don't know what I'm talking about?  Okay, I will give you an example:

Bogus Marijuana Industries Makes Key Acquisition

Upper Boot Lick Ontario, (Made Up Newswire) December 2nd 2016 -- Bogus Marijuana Industries (SPLFF) an emerging entrant into the Marijuana Growing Industry today announced the acquisition of a new property as the company expands its operations in the exciting Cannabis market.  

Bogus Marijuana has acquired 100 acres of land in Doobie Township British Columbia which it intends to cultivate into its flagship operation as the company seeks to become a major supplier of both medical and recreational marijuana.

Bogus CEO Jay Rolling commented:  "This is a major accomplishment for the company, with Canada and numerous states either legalizing recreational use or soon to be doing so we know this will be an incredibly lucrative market, and with the acquisition of this property Bogus Marijuana is positioned very well with excellent prospects for significant growth".  

Marijuana for medical and recreational use is forecast by experts to be a $100 billion dollar industry in North America in the coming years, with some even suggesting a figure almost double that within the next decade.  For further information on Bogus Marijuana please visit the company's website or contact Investor Relations at IR@bmipot.com

We seek Safe Harbor

Sounds good doesn't it?  

• Lucrative market  
• Excellent prospects
• Well positioned
• Significant growth

Yes, it sounds good, but its all meaningless....its just hyperbole.  Safe Harbor isn't a fishing village in Maine.  It means that forward looking statements are just that, forward looking and they can't be relied upon.  If the excellent prospects don't work out, oh well, if it turns out their position ends up being dead last investors can't complain.  If significant growth means they go from $50,000 in revenue for the first quarter to $50,005 in the second quarter, too bad so sad.  Some other words to look out for are: plans, measurable, synergy, dynamic....there are far too many to list all of them.

Still reading?  Good, because this is where the real fun starts.  

First let's recap and consider some of the costs.  

The reverse merger (also called a reverse takeover or RTO) into the empty shell would cost around $1 million.  The promoters we'll peg at a generous $50,000 and we'll toss in another $50,000 for general expenses.  Then there's the land acquisition which we'll peg at $5 million, but it can be heavily mortgaged and can later be sold.  

That's a lot of cash, over $6 million, but with the land bought using leverage you're only out around $1.1 million.  You know the old saying, it takes money to make money.  

And what's the pay off?  Those shares that were 1 cent when the RTO took place are now trading around 15 cents we'll say.  And the 50,000,000 you've hired a broker to unload, if they're sold at an average of  25 cents, they will be worth $12,500,000 in cash.  If the stock gets pumped up to 50 cents, then double that to $25 million.  

Great, but if they're going to be sold at an average of 25 cents, then there need to be buyers willing to pay that price.  And this is where having a professional broker comes into play, hopefully you have a good one and he'll be able to maximize your profits, it could be a her but chances are its a guy. You might hire more than one.

The promoters have attracted investors, you've put the news out, everything is set.  Some social media posting on stock message boards, FaceBook, Twitter etc would be good to have right now too. And maybe the professional broker you hired will put a big order on the bid side through a number of different trading houses, maybe 5,000 lots we'll say....that's 5,000,000 shares worth of buy side interest.  Given that you and perhaps some of your friends or associates own most of the available shares the broker isn't going to have to worry about too many shares hitting the bid, and if they do....who cares.

Now the sheep are watching, the pumpers are pumping, the Level II quotes are being shared and it looks like there is huge buy side interest in Bogus Marijuana.  Not many shares are made available on the ask side and the PPS starts climbing fast.  15 cents, 16 cents, 18, 20, 25, 30.  The herd goes full retard, falling over themselves to get as many shares in this "no brainer" sure fire winner. 

• Remember "The Art of War".  When the pro is selling he makes the sheep believe he is buying. There might even be some pre-market activity to get people thinking that "something is up,  someone knows something".   

But wait!!!  When those shares show up on the ask, that's going to alert the herd that there's some heavy dumping in store, right?  Wrong.  Not if the broker uses an iceberg order.  When the stock hits 20 cents he can have 10 lots showing as "the tip" of the iceberg, the retail herd will see that. But he can have another 1,000 lots hidden "underwater" so to speak, the unseen and largest part of the ice berg. And he can do that right up though 25 cents, whatever the market will handle.  

The stock trades millions, maybe tens of millions of shares in a single day.  All the shares don't have to be sold on the way up either, some retail players know the game and will start booking profits themselves.  When too much selling hits its time to close the bag, dump a large number and bring the PPS down closing the bag.  Some retailers will average down, convinced Bogus is a winning company and that dark market forces are messing with the share price.  And they are, but now its too late.  

And when its all done and the 50,000,000 shares have moved out of smart money hands and into dumb money retail hands, the game is basically over.  The biggest losers will be those who ride a pump all the way down.  $12,500,000 generated from selling at an average of 25 cents, that cash should be enough to last at least a couple years.  It'll cover the mortgage payments on the 100 acres of farm land and fund business operations.  The company will have a phone line, a web site, maybe an office in one of those shared business operations or a mailbox with an actual street address.  

Its a dirty game, and before you play you should learn the rules the professionals use. The game requires people with more money than brains and lots and lots of greed, and those things are never in short supply.  Most people won't read this miserable and pathetic little blog so the machine will go on grinding away.

NOW PLEASE TAKE NOTE

This is a blog, an opinion piece.  Take nothing I have written here for granted.  If you haven't developed at least a bit of a cynical nature, then start right now with what I've shared here.  Research what I've written about, google things like Ice Berg order and stock promotion.  

Ultimately each person is responsible for their own decisions.  I hope this helps make you a better investor or trader, good luck.   Oh, and if you want to share this blog posting, by all means please do....FaceBook, Twitter, on message boards, its all good.  I have been accused of being an attention whore, and the only answer I can give to that is "mea culpa", guilty as charged.

Cheers

Message board fun and games with Cannabis plays like New Age Farms

Banter on stock message boards can be fun.  On occasion you might stumble on someone sharing some useful information, but by and large it typically degenerates into a penis waving contest between those pumping the positives and others who bash based on the negatives.  I am prone to do both, with different stocks of course.  

New Age Farms trades in Canada on the Canadian Securities Exchange (CSE) under the symbol NF and in the U.S. on the OTCBB with the symbol NWGFF.  The company came onto my radar the same way many penny stocks do, via a promotional email blast from some outfit that calls itself Daily Stock Reporter.  

The email itself is pretty much standard boiler plate for penny stock promotion, with the typical hyperbole you would expect:  "There's no telling how big of a run this could have....".  If you look closely at the small font print at the bottom of the email it discloses payment of $12,500 in cash. There's also a link to a "Full Report":  http://egmprofiles.com/NWGFF.pdf

If you bother to go onto that site you'll see the disclaimer again at the bottom, and if you click the word disclaimer it takes you to this EGM's disclaimer page.  I have to admit that I love the honesty and candor, they basically say "this is a pump".  Here's a cut and paste of some of what it says.

What will happen when the Campaign ends?

Most, if not, all of the Profiled Issuers are penny stocks that are illiquid and whose securities are subject to wide variations in trading price and volume. During the Campaign the trading volume and price of the securities of each Profile Issuer will likely increase significantly. When the Campaign ends, the volume and price of the Profiled Issuer will likely decrease dramatically. As a result, investors who purchase during the Campaign and hold shares of the Profiled Issuer when the Campaign ends will likely lose most, if not, all of their investment.

Why do we publish only favorable Information?

We only publish favorable information because we are compensated to only publish favorable information.

Why don’t we publish negative information?

We don’t publish negative information because we are not paid to publish negative information. We are paid to publish only favorable information.

Is the Information complete, accurate, truthful or reliable?

The Information is a snapshot that provides only positive information about the Profiled Issuers. The Information consists of only positive content. We do not and will not publish any negative information about the Profiled Issuers; accordingly, investors should consider the Information to be one sided and not balanced, complete, accurate, truthful or reliable.

What we do not do.

We do not publish negative information about the Profiled Issuers. We do not verify or confirm any portion of the Information. We do not conduct any due diligence or research any aspect of the Information including the completeness, accuracy, truthfulness or reliability of the Information. We do not review the Profiled Issuers’ financial condition, operations, business model, management or risks involved in the Profiled Issuer’s business or an investment in a Profiled Issuer’s securities.

Its hard to argue with that disclosure, its pretty bang on the money and brutally honest.  If you want to read the whole thing here's the link:  http://www.egmfirm.com/disclaimer/

I shared that information on Stockhouse.ca, my user ID is ledrog and I've been on that site since 2001. As you might expect I was attacked by the bulls as a short, accused of using multiple IDs, and of engaging in manipulation so that I could load up "cheap".  I find that funny since it wasn't long ago that NF was trading around 2 or 3 cents, so I hardly think anything over 10 cents is "cheap".  

Full disclosure, I have no position in NF long or short and no intention of initiating one at any time in the future.  

Okay.....so the bulls say:  What of it?  Read the news, this is a great company.....gonna be huge, great business plan, yadda yadda yadda.  Yeah yeah, I've heard it all before.

These emails are aimed at the lowest common denominator in my opinion, people with more money than brains.  I'm talking about people who think "Safe Harbour" is a small town in Newfoundland. Its "Forward Looking Language" we're talking about here.  Anything that says we: expect, anticipate, plan or similar type language.  It sounds great, but these are not material statements of fact.  Plans don't always work out, expectations are often not met, things that are anticipated sometimes never come to pass.

Regular readers know I'm not big on fundamentals, especially with highly speculative stocks.  The point I keep trying to drive home is that if you want to make money with penny stocks, your best chance is with companies that are lightly traded, because the sheep haven't been called to the dinner table yet.  

The risk you take buying when things are quiet is that the herd will never show up.  That the promotion, news and hype that gets the great unwashed all excited, greedy and buying high, that it won't happen.  In my view that's still better than storming into a stock that's already climbed from 1 or 2 cents to 20 or 30 cents for gains of 1,000% or more.

I'd love to post a chart of NF, but charting sites are few and far between for CSE listed stocks. The CSE has the easiest listing standards in Canada, I liken the CSE to the U.S. OTC non-reporting Pink Sheets, sometimes called the Gray Market.

Cannabis stocks are popping up all over the place, and I fully expect to get more emails on others, especially for those listed on the CSE and Pinks.  I have taken a couple of flyers myself and if one of the companies I hold starts getting pumped and promoted in this fashion, I'm sure you can guess what I'll be doing.

Good luck