We did not coin the name - Mel Brooks did - so we have no right to feel proprietary about the word “Spamalot.” But pardon us for having a sense of satisfaction when the SEC announced “Operation Spamalot,” a regulatory initiative designed to protect investors from spam email hyping worthless stocks.
On September 6, 2006, StockPatrol.com launched a new feature called “Spamalot – Penny Stock Style.” As we noted at the time, spam email is used to tout obscure companies that generally share a common thread - an undistinguished past, an uncertain future, and no legitimate reason for optimism. We promised to report on these aggressive promotions from time to time – and we have. Since September 2006, we have published reports on several such highly touted stocks, including Alliance Enterprise Corporation (Pink Sheets: AETR); Makeup.com (Pink Sheets: MAKU); Capital Reserve Canada LTD (OTCBB: CRSVF); Shallbetter Industries, Inc. (SBNS); Texhoma Energy, Inc. (TXHE); Amerossi EC (Pink Sheets: ARSS); Diamant Art Corp. (DIAFF); and Physicians Adult, Daycare (Pink Sheets: PHYA).
So we welcome the SEC’s assault on spam promotions, which is off to a blazing start. On March 8, 2007, the SEC announced that it had suspended trading in the securities of 35 companies, each of which had been the subject of recent and repeated spam email campaigns. The Commission stated that questions had been raised regarding the accuracy and adequacy of public information about each of the suspended companies. None of the companies are listed on a national stock exchange or on the OTC Bulletin Board.
The trading suspensions, which commenced on March 8, 2007, will terminate at 11:59 p.m., EDT, on March 21, 2007.
The SEC estimates that more than 100 million spam stock promotion messages are sent every week – and the number could be conservative. The spam campaigns are transparent efforts to pump up trading volume and share prices – but they seem to seduce enough investors to achieve those goals. Stock prices often rise, and trading spikes as the spasm circulate. Then, once the insiders orchestrating these schemes dump their shares, trading slows down, prices drop, and public investors lose money.
More suspensions are likely to follow, as the SEC pursues “Operation Spamalot,” and targets spam emails that hype small companies with promises like “Ready to Explode," "Ride the Bull," and "Fast Money."
- The SEC cited several examples of recent trading patterns, affected by spam email:
On Friday, Dec. 15, 2006, shares in Apparel Manufacturing Associates, Inc. (APPM) closed at $.06, with a trading volume of 3,500 shares. After a weekend spam campaign distributed emails proclaiming, "Huge news expected out on APPM, get in before the wire, We're taking it all the way to $1.00," trading volume on Monday, Dec. 18, 2006, hit 484,568 shares with the price spiking to over 19 cents a share. Two days later the price climbed to $.45. By Dec. 27, 2006, the price was back down to $.10 on trading volume of 65,350 shares.
- On Dec. 19, 2006, trading in Goldmark Industries, Inc. (GDKI), closed at $.17 on trading volume of 126,286 shares. On Dec. 20, 2006, the spam campaign started, with e-mail proclaiming "GDKI IS MAKING EVERYONE BANK!," and setting a 5-day price target of $2. By Dec. 28, 2006, spam emails boasted of the price spike that had already been achieved -- "$.28 (Up 152% in 2 days!!!)" -- and promised a 5-day price target of $1. That same day, GDKI closed at $.35 on a volume of more than 5 million shares. By January 9, 2007, the closing share price was back down to $.15.
- A spam campaign in Healtheuniverse, Inc. (HLUN) stock began on Sept. 4, 2006, with emails incorporating a Healtheuniverse press release proclaiming that HLUN was "focused on being the first to commercialize stem cell applications in the $15 billion worldwide plastic surgery and cosmetic surgery market." On Sept. 7, 2006, HLUN closed at $.12 per share on trading volume of 3,000 shares. The spam campaign accelerated, and HLUN shares spiked to $.22 per share on Sept. 11, 2006, with over 2.2 million shares trading hands. By Sept. 22, 2006, the closing price had dropped back down to $.11.
The 35 companies whose trading was suspended today are:
Advanced Powerline Technologies Inc. (APWL);
America Asia Petroleum Corp. (AAPM);
Amerossi Int'l Group, Inc. (AMSN);
Apparel Manufacturing Associates, Inc. (APPM);
Asgard Holdings Inc. (AGHG);
Biogenerics Ltd. (BIGN);
China Gold Corp. (CGDC);
CTR Investments & Consulting, Inc. (CIVX);
DC Brands International, Inc. (DCBI);
Equal Trading, Inc. (EQTD);
Equitable Mining Corp. (EQBM);
Espion International, Inc. (EPLJ);
Goldmark Industries, Inc. (GDKI);
GroFeed Inc. (GFDI);
Healtheuniverse, Inc. (HLUN);
Interlink Global Corp. (ILKG);
Investigative Services Agencies, Inc. (IVAY);
iPackets International, Inc. (IPKL);
Koko Petroleum Inc. (KKPT);
Leatt Corporation (LEAT);
LOM Logistics, Inc. (LOMJ);
Modern Energy Corp. (MODR);
National Healthcare Logistics, Inc. (NHLG);
Presidents Financial Corp. (PZFC);
Red Truck Entertainment Inc. (RTRK);
Relay Capital Corp. (RLYC);
Rodedawg International Industries, Inc. (RWGI);
Rouchon Industries, Inc. (RCHN);
Software Effective Solutions Corp. (SFWJ);
Solucorp Industries Ltd. (SLUP);
Sports-stuff.com Inc. (SSUF);
UBA Technology, Inc. (UBTG);
Wataire Industries Inc. (WTAF);
WayPoint Biomedical Holdings, Inc. (WYPH); and
Wineco Productions Inc. (WNCP).
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