In case you missed it, Timothy Sykes promoted IRYS this morning in an email to those who signed up to his free promotional email list for the re-launch of his longer-term penny stock trading newsletter. See the email online here. The disclaimer from his email is as follows (bold added by me):
DISCLAIMER: This newsletter is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. Millionaire Media, LLC and Market Authority, LLC, have been compensated one hundred thousand dollars for the distribution of this particular email. Any future email regarding a specific company will be the result of an advertising and promotional campaign for which Millionaire Media, LLC and Market Authority receives compensation. This compensation constitutes a conflict of interest, as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this newsletter as the basis for any investment decision. Millionaire Media and Market Authority do not hold positions in the covered company.
While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.Market Authority is also not a registered investment adviser. We do not and will not provide personalized investment advice. Market Authority publishes opinionated information about finance and trading that we believe our subscribers may be interested in. Click here to view our entire dilsclaimer.
Past performance is not indicative of future results.
[Update 3/5/2011 – See Tim’s blog post about this]
I have to acknowledge my failure in this situation. Tim asked my opinion on him doing an ‘ethical’ stock promotion some time ago. I was vehemently against the idea of him doing that — I felt that he would take a huge hit to his reputation even in a best-case scenario. If the pump were to bomb and his subscribers lost money the hit to his reputation would be huge, I thought. I feel now that I failed and I should have been more against it — I should have said that I would cease working with/for Tim if he did ever get paid to promote a stock.
The fact of the matter is that it is hard if not impossible to have a successful stock promotion without blatantly lying. The whole point of stock promotion is to get suckers to invest in worthless companies so that insiders or other large shareholders can sell their shares. If mostly day-traders buy a promoted stock, then they will buy from the promoters at first but then their sells later in the day will crowd out the sells of the promoters. Longer-term investors will buy and hold for days or weeks or months or years and thus not compete with the promoters to sell stock.
By promoting a stock while not actually hyping it up, the promoter will get fewer buyers (mostly day-traders) and the promotion will do poorly. I believe we are already seeing this in IRYS, where there was a bunch of buying in the first 15 minutes after the open, sending it up from its .755 open to a brief high of .83, before it started fading. The current price action does not bode well for the stock.
If you look at Tim’s email you will see that he didn’t put absurd price targets in it nor did he hype up the company. That makes his stock promotion less unethical than others. It still leaves a sour taste in my mouth and I know more than a few of his subscribers are unhappy with Tim for engaging in any stock promotion.
As to what I did with IRYS, I bought 21,000 shares at the open and sold almost all those shares in the first 15 minutes (I sold my last shares at $0.801 at 10:54 AM EST) . I have no position remaining and I netted just over $870 in profits. I did not mention my buys in Tim’s chat but said I would not discuss my trading of the stock; as with all pumps, I urged everyone to be careful and not to chase the stock. I did alert when I had sold most of my shares and when I sold the last of my shares so that people in chat would think twice before buying it at the elevated prices it was at (over 80 cents). I no longer have a position in IRYS and I will not buy it again (I may short it in the future). I always strive to maintain the highest levels of ethical behavior and I believe that I acted in such a way as to minimize not just any conflict of interest but even the appearance thereof. That being said, I am a trader first and a blogger and chat moderator second — I was not going to avoid trading IRYS just because Tim Sykes was the one pumping it.