NEW YORK (TheStreet) -- Investors who have missed the recent 400%-plus rise in Lot78 (LOTE:OTC) should know there might still be time to profit from this stock's coming plunge, because it is a complete scam/pump-and-dump.
Warning: Be careful trading penny stocks. Some of them are truly wealth killers, unless you can be on the right side of the trade. Never buy-and-hold stocks with any resemblance to GOFF, a stock I warned you about.
Lot78 says it focuses on the design, marketing, distribution and online sale of its eponymously named urban apparel in five continents.
As an ongoing business entity, Lot78 has zero revenue and net losses of $38,000 for the most recent reported quarter. It also lost $21,000, $2.0 million and $2.0 million, respectively in the three previous quarters. It has $5,000 in cash to cover $148,000 in current liabilities at the end of last January.What Lot78 does have is a very effective investor relations campaign.
According to Google Finance, the beta for Lot78 is 38.00, while the beta for the market as a whole is 1. The people hired by Lot78 to promote the stock are obviously very effective at moving the stock price, as shown by the chart below. Courtesy of Yahoo! Finance Lot78's stock promoters recently sent out a "touting" mailer that urged investors to buy the stock, compared the company to True Religion (TRLG) and included a bullish company press release that -- conveniently -- had no hard numbers. The mailer is identified as a "Breakaway Stocks Special Report," which might lead some readers to believe it's from reputable stock analysts. Smallcap Fortunes/Capital Financial Media sent the mailer on behalf of Lot78. A headline on the mailer says, "Now, Lot78 (LOTE) Could Be Your Next Chance At Grabbing A Giant 5,300% Profit!"
In the body of the press release, Ollie Amhurst, President of Lot78, makes lots of bullish statements about the company's newly added e-commerce offering:
"The addition of our e-commerce capability is a very important step in diversifying our sales channels, opening up markets and growing revenue. We are ready to significantly grow and diversify our product line, which will enable us to enter much larger markets. In conjunction with our existing strategy in our wholesale division we intend to target not only the core fan base of Lot78 but also to reach a far wider audience through our website."Following, however, is the fine print associated with the mailer:
"CFM has managed a total production budget of up to $2,500,000 for advertising efforts and will retain any amounts over and above the cost of production, copywriting services, mailing and other distribution expenses, as a fee for its services."Smallcap Fortunes/Capital Financial Media are handling a budget of up to $2,500,000, which means that the actual budget could be anything less than that, and the promoters pocket the difference. Just like any other pump and dump scheme, Lot78 stock will collapse once the promotion winds down. Lot78 is a blatant pump-and-dump. The Securities and Exchange Commision defines pump-and-dumps at its Web site as follows:
"Pump-and-dump" schemes involve the touting of a company's stock (typically small, so-called "microcap" companies) through false and misleading statements to the marketplace. These false claims could be made on social media, as well as on bulletin boards and chat rooms."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV