Anything that can even remotely be attached to medical marijuana is revisiting the preposterous trading patterns of a year ago when millions were made, mostly by those with the benefit of being an insider seller, and many more millions were lost. Some, like Hemp,. Inc. (HEMP), convicted felon Bruce Perlowin's latest foray into the penny stock world, are benefiting from word association, as that company has nothing to do with medical marijuana. According to HEMP's Company Information page at OTCmarkets.com, the Business Description, which is provided by the company itself, states that:
"The company is in the business of research and development of all things made of industrial hemp. From clothing to nutraceuticals. These products are used all over America every day and are sold in the largest and most respected stores. Industrial hemp is used for making fabric, paper, insulation, and plastics. It's seeds are consumed for the high protein level and omega fatty acids. Hemp oil is used for cooking and in salad dressings. Hemp should not be confused with marijuana which is illegal and contains psychoactive ingredients. Hemp does not contain psychoactive compounds and is legal in the United States and most of the world."The newest enigma in the space is Advanced Cannabis Solutions, Inc. (CANN), the ticker that may kill off more bank account balances than any of them, starting with murdering the shorts and ending with strangling the longs. Shares have been climbing at a ridiculous pace to ridiculous heights for seemingly little reason. The company describes its existence as follows:
"ACS provides a comprehensive set of solutions to the regulated cannabis industry. The Company does not grow, harvest, distribute or sell cannabis or any substances that violate United States law or the Controlled Substances Act, nor does it intend to do so in the future.
The Company leverages its management team's extensive experience in serving the cannabis industry by providing the following three distinct areas of products and services: real estate, consulting, and ancillary products. ACS plans to work exclusively with licensed and regulated clients."Huh? Perhaps you know what this means- we're not even going to try and figure it out. What we do know is that this company, which as recently as September 30 reported NO assets other than $473K in cash, is worth nowhere near its current $272 million valuation. Not even close.
Perhaps, traders are induced by today's announcement of a $30 million credit facility whose main achievement will be to create new stock at greatly discounted prices. The announced lender, Full Circle Capital Corporation, reportedly will initially fund $7.5 million that can be converted to stock at $5 per share, less than a third of the current share price. That's a nice mark-up and yet curiously, Full Circle Capital Corporation, which itself is a public company trading on NASDAQ as ticker FULL, did not join in the announcement. Just as curious, is the lack of an SEC filing which one would expect to accompany the announcement and should provide the details of the agreement and a copy of the contract.
Something stinks. Actually, a lot of more of the facts carry a pungent smell.
Smelly Fact #2: On June 30, 2013, less than seven months ago, 12,400,000 shares were issued for $.001. Today's buyers are paying 1,800,000% more for those shares.
Smelly Fact #3: On August 14, 2013, the company bought back (and subsequently cancelled) 8,000,000 shares at $.0125 per share, a 1,250% premium to the price it had sold stock just six weeks earlier. Ugh!
Smelly Fact #4: During July and August of 2013, the Company issued 707,000 shares of its common stock at $1.00 per share. Those beneficiaries are ahead a relatively paltry 1700%. But there's more to this smelly fact than meets the eye. Read on.
Smelly Fact #5: According to their most recent quarterly filing, in the third quarter of 2013, the company paid $150,000 for an option on real estate. The option, which seemingly had a very short term, expired WORTHLESS! That took some astute management, wouldn't you say?
Smelly Fact #6: The same quarterly filing states, "The net loss for both of the periods presented in these financial statements was ($472,016). Most of this loss was due to startup costs for the real estate division, consisting of legal and consulting fees, as well as management payroll costs." $472k??? For what? Losing $150K on a bad option agreement? And what "startup" costs? The company does nothing. Perhaps management should have kicked in their payroll for their poor management.
In the meantime, those inclined to short and can find stock to borrow, are happily doing so. This includes self-proclaimed penny stock guru, Tim Sykes, a man-child with a shit-eating smirk who reportedly took his bar mitzvah money and turned it into a fortune playing penny stocks. That Sykes is smart is unquestionable, but what is not widely known is that these days his real money comes from selling his stock trading systems, programs and tickets to his personal appearances. While he trumpets the two traders who have become millionaires following his system, there is no discussion of the number of failures among his flock. There are plenty of them and complaints abound on the internet, such as these ones.
Over the weekend, Sykes issued a public announcement that he is short shares of CANN and presenting his argument for being short. Obviously, we are mostly in agreement with most of Sykes' reasoning, as it is the same arguments we present for staying away from the stock. But, when Sykes goes beyond his paying clientele with stating his position, we suspect that he is nervous. He might have reason to be.
Shares are still relatively tightly held and we wouldn't be surprised if the ongoing surge isn't at least partly assisted by wash trades. This makes us wonder if we are about to witness another insider-controlled short squeeze like the one inflicted on another questionable issuer, namely Lot78, Inc. (LOTE). Shorts took a rare clobbering in that one, before shares succumbed to their true destiny: a beeline towards zero. We think that Sykes could be wondering if he is staring at another LOTE and wouldn't be surprised if he is nervous about his short position.
The LOTE analogy makes us think that the shorts should also stay away in droves. Still, whether a CANN short squeeze is coming or not, one thing is certain: these shares will inevitably go south and end up close to zero. And that brings us to-
Smelly Fact #7: We have received several reports that as of last Friday, January 17, 2014, CANN was still trying to privately place shares at a buck. That makes us think that the current share price has been rigged to attract private investors. It also makes us wonder what the hell Full Circle Capital Corporation is doing.