Press Releases Scams And Successes
Even novice investors are likely well acquainted with PressReleases, however it may serve all investors to review someimportant aspects of them. Press releases are a means throughwhich companies can keep the public up to date regarding theirrecent affairs. It is the duty of every public company to keepits investors and indirectly potential investors aware of whatis going on in the company. It should not be forgotten, however,that it is in the ultimate interest of the company for the priceof the stock to increase. Consequently, companies areincreasingly selective about what and how information ispresented in such releases. Your mother always told you, “If itsounds too good to be true, then it probably is.” That popularadage holds particularly true with regard to penny stockcompanies’ press releases. Certainly all press releases areoptimistic; companies would not release them otherwise. But whenlooking to invest in a company, be aware of overly ambitious,optimistic, and unsubstantiated press releases. A company thathas had annual 
revenues of 10 and 11 million for the past twoyears and that claims that the coming year will bring revenuesof 40 to 50 million, better have a darn good reason. Examiningpress releases by breaking down the argument into its underlyinglogic is an excellent way of uncovering reasoning that has beenintentionally muddled to appear better than it is. For example,if a company says that its software sales increased 300% overthe past year but do not indicate what percentage of their totalrevenue was composed of software sales, be suspicious. If acompany does not lay out a detailed plan explaining how theywill make money and increase earnings, it is likely that theironly source of revenue is selling valueless shares to suckerinvestors. Another diversionary tactic more frequently employedby Pink Sheet Stocks but which have also been used by OTC-BBstocks, is ambivalence about their filing status. Thesecompanies know that one of the most sure-fire ways to increasethe price of the stock and thus the earnings of the investor isif the stock becomes listed on a higher exchange. (That is, theOTC-BB for Pink Sheet Stocks, the NASDAQ for OTC-BB, etc.)Because of this knowledge, unscrupulous marketing firms or eventhe companies themselves will release information indicatingthat they either will file or have filed the financials andpaperwork necessary to apply for another exchange. This releaseis typically followed by a sharp increase in the stock price,and then…nothing. If pushed the company generally makes up somegarbage about how for one reason or another now was not a goodtime to file after all, but that they had sincerely planned toall along. The reality is, they were driving up the price sothat they could dump the stock and make a killing offunsuspecting investors. Unless you specifically know 100% forsure that the company has actually hired the personnel and thenphysically handed over the financials to be evaluated, youshould follow this simple advice:
When a company says = What it actually means is We are planningon filing this quarter = We are planning on selling our sharesthis quarter. We have filed with the SEC = We will soon be underinvestigation by the SEC for what we are currently doing.
That is not to say, however, that you should not generally trustand act upon Press Releases. One type of positive Press Releaseof particular note to Penny Stock investors is when a small firmannounces that they have entered into an exclusive agreementwith a larger company to perform some function or service forthat company. This sort of press release is particularlyimportant for potential investors for a number of reasons. Thefirst is that unlike announcements which optimisticallyprognosticate about the future, this sort of announcement isverifiable through the partner company. For example, if ABCInternet Technologies Company signs an exclusive contract toprovide General Electric with its accounting software for thenext five years you can be assured that the price of ABCInternet Technologies Company will skyrocket. To verify theannouncement, you can check with the more established GE whoshould also release information on the contract. Some of themost pertinent information will be; the size of the contract,the exit penalty on the part of GE, as well as the anticipatedinitial investment on the part of the Penny Stock Company. Thiswill allow you to predict the new valuation of the company anduse this information in deciding on your own plans for buyingand/or selling the stock. Another potentially windfall-esquediscovery amongst Press Releases is being on the front end ofthose to discover a release indicating that a firm which hadpreviously been slated to file for bankruptcy has reached anagreement with creditors to continue. The proposition ofbankruptcy is a very real threat for some Penny Stocks, and as aconsequence typically the price of such stocks is trading atonly about a cent because if the firm goes under shareholderslose their entire stake. If a company is able to avoidbankruptcy the price will typically multiply many, many timesover offering early investors the opportunity to multiply theirmoney 10 or 20 times over in less than a day. (Not bad for aday’s work, eh) The key to understanding press releases is theability to simultaneously act upon two contradictory thoughts.Remember that the Penny Stock market, because it is lessinstitutionalized, is often more about predicting the emotionaland erratic behavior of your fellow investor rather than simplymaking the next rational and logical decision based on thenumbers. In this sense, it is important when reading a PressRelease to consider how your fellow investor will interpret theinformation initially, for this will come to formulate much ofthe initial direction and drive of the stock. But it is alsovital to consider the Press Release more meticulously. If youfind that the company appears to be leaving importantinformation out, seems to be muddling numbers and percentages,or uses any of the catchphrases for standard scams, avoid thestock altogether. Even if your’ fellow investors initially driveup the price of the stock and you believe you could have been atthe crest of that rising wave, you cannot be sure when the scamwill hit. You can have no idea whether inside investors areplanning to dump their stock at 50% 100% or even 200%. Andthough you may be able to earn a profit once or twice, byplaying the game to can ensure that after a time you will guesswrong, sell out too late, and be stuck holding thousands ofshares worth less than the paper they are written on.
