A textbook example of a penny-stock pumping operation:
* PuraMed Bioscience (PMBS) has a “going concern” warning from its auditor, and has stated that it cannot continue business without raising money. Source: annual report.
* The company had $30,000 in sales last year, while the 2 executives paid themselves $180,000 and enormous quantities of stock (which they have to dump in order to get their money). Source: annual report
* The company has a track record of paying bills, such as those from consultants, by issuing large amounts of shares for as little as $0.15 per share. Source: annual report.
* The company has marketed as an “independent study” a study of its main product, LipiGesic, that it funded. The CEO was one of the researchers. The CEO paid himself in shares for conducting the research on LipiGesic. Source: press releases and the company’s annual report.
* LipiGesic is based on feverfew, which is a kind of daisy that anybody can grow. Yet, the company is trying to sell LipiGesic in packaging that only contains 6 doses for between $20-$30. Source: company site and Web searches.
* Feverfew is associated with side-effects, including rebound headaches and miscarriages. The company doesn’t, or didn’t until recently, warn about side-effects. Source: Web research; company Web site.
* The company is changing its Web presence in response to comments on the PMBS.OB Yahoo message board.
* The vast majority of posts to the PMBS.OB board are from accounts that post almost nowhere else. Many of those accounts were created in the last few months, for the exclusive purpose of promoting the stock.
* Many of the insiders were previously involved with Quigly Inc.’s product, Cold-EEZE. The nasal spray version of that product destroyed the sense of smell of some users, resulting in a class-action lawsuit. The officers were also sued by shareholders for unjustly enriching themselves at shareholder expense. For example, see this old Motley Fool article…
…the Barron’s piece laid out an astonishing web of people “censured, barred or jailed by securities authorities for stock fraud” who have had, or still have, connections with Quigley Corp. The article ended with the kind of knowing comment Barron’s loves to issue: trading in Quigley stock was now under investigation by the Securities and Exchange Commission (SEC), so investors shouldn’t expect the stock to “levitate” forever.
Specifically, Alpert reported that Raphael D. Bloom, a disbarred stockbroker convicted in 1989 of stock fraud, had introduced company Chairman and CEO Guy Quigley to a financial consulting and public relations firm called Diversified Corporate Consulting. The “managing member” of Diversified is William A. Calvo, III, a securities lawyer who was disbarred in Florida state court, and later in Federal Court, for his participation in a fraudulent public offering…..
Can you short penny stocks? Actually, some brokers allow it. The maintenance requirements are high, however.