As promised, I wanted to touch base on the real sharks you have to watch out for in the junior stock game...they are normally referred to as "The Promoters". These investor relations guys have a job to do and that is bring in new shareholders and pump a stock's great points and gloss over the not so great. There are different levels of trust developed depending on what level of junior company you are thinking of investing in which naturally reflect back to my previous post about the "quality of the management ". A good company brings in good guys to represent them.
Some are very experienced guys who have come from bigger successful companies and bring a wealth of market/sector knowledge and maybe have some decent education in the form of sales and communications. These guys can be a huge wealth of info if you are thinking you may have found a real gem of a new junior company. The more you can learn on the inner workings of the company the better your odds.
But there is another couple of groups you have to be the most wary of. One is the young and inexperienced,where you are liable to get little value from as they read from a script. They are also known to chow down on a burger while they try to impress you or they sound very disinterested in even talking with you and have better things to do and offer up almost no info you couldn't get off the website. Believe me,it's happened. I always believe in giving a young buck a chance but many a query has left me less than satisfied.
The other group is the seasoned junior company types who never made the grade to Bay St. and have bounced around the junior resource stocks awhile with a track record of loser/delisted companies. There are some I am sure who love this style of promoter work because the blue chip stocks just isn't there style, but it is usually about the exorbitant amount of money they can make on their cheap options and you will help their cause.
I've met all types over the years, some good,some very good, and some rotten to the core SOB's. The bottom line is they want your money, but usually at certain times of the company's business cycle. One is for private placements, and the other is when they want the share price up to sell out older warrants from previous PP's that will give the company money in the till. They will usually release some enticing news around this time too.
Always ask yourself, "why is he calling me and I have never met him ?" Because somewhere, someone in another company got your name off a list referred to as a "suckers list" that they are known to share amongst each other. Not many times have I had a call from any IR guy just to update me on things, there is always a reason no matter how well you think you know them.
Maybe there is a large shareholder who wants out and they are looking for some buyers,maybe they want the price up so insiders can sell to raise more money cheaper. Most are legitimate business reasons but not always in "your" favor and some can be downright shady. Prices can easily slide back after the price push so you must be on the ball at all times to not buy at the top of one of these stock pumps.
Sounds like almost a real job to dig for this info ? It can be at times, but this is why I am trying to help you cut some corners and save yourself some grief and lost cash and to help you buy when it's undervalued and your risk is low, that is when you make the serious coin.
So next time the phone rings from company ABC,or when you call them seeking some info, dig deep on your due diligence and see where the company is financially, that is the key with these junior plays and will save you much money, especially when "the story" sounds to good to be true.
Next time I will talk about the mining game as some serious money can be made if you know what to watch out for.
Later !
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