Belated Post: SEC Suspends trading in purported Ebola stocks

One thing I have noticed over the last seven years trading penny stocks is that penny stock scammers are quick to hop on any current investment theme. If oil is spiking, we will see a lot of shell companies quickly turn into oil exploration companies. If there is a spike in the price of rare earth elements, we will see a new crop of rare earth miners. Recently with the Ebola panic we had a bunch of penny stocks touting their connection to the disease. And the SEC was quick to act to suspend trading in some of the most egregious Ebola stocks.

See the chart of Lakeland Industries (LAKE) below to get a sense for the timeline over which the Ebola hype played out (LAKE is shown as it was one of the Ebola stocks that spiked the most; is a real company and was not implicated in anything):

lake

The peak of Ebola panic occurred around the 13th of October 2014. Just over a month later, on November 20th, the SEC suspended trading in four purported Ebola-related penny stocks. The four stocks that were suspended by the SEC were Bravo Enterprises Ltd. (OGNG),  Immunotech Laboratories, Inc. (IMMB),  Myriad Interactive Media, Inc. (MYRY), and Wholehealth Products, Inc. (GWPC).

SEC Suspension notice (PDF)
SEC Suspension order (PDF)

 

Disclaimer: I have no position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

4 thoughts on “Belated Post: SEC Suspends trading in purported Ebola stocks”

  1. MG:

    Let’s say you had a position in LAKE, either shares or options and the SEC suspends trading. How would you unload positions or could you at some point later? And, if holding options and the suspension lasts longer than the expiration date of the options are you totally hosed on the options?

    1. The SEC cannot suspend trading in a listed stock like LAKE. They can only suspend trading in OTC stocks, and their suspensions only last two weeks. Nasdaq trading halts can last for days, weeks, or months. A couple Chinese fraud stocks were halted for over a year. If you are short a stock that is halted you will end up paying borrow fees the entire time it is halted. Eventually the halt will end (the stock may be delisted at the same time to the OTC) at which point you cover. While not in the US, I have a short position in one stock that I have had for 8 months now and it remains halted (in Hong Kong). Even if it gaps down 50% most of my potential profit will be eaten up by borrow fees.

      The option question is a very intriguing one. I do not know the answer. I do remember there was a big issue with that with SinoForest (which was listed in Canada and had options there and it was halted for half a year or so). See this: http://www.theglobeandmail.com/report-on-business/streetwise/fate-of-sino-forest-options-murky-after-halt/article617300/

  2. Thanks for the reply. I’ve traded options in the past but only on the mid and large caps, mostly credit spreads. I doubt I would trade options on p stocks.

    I’ve been watching the email videos from Tim and it looks very promising as far as what I would like to start doing. I understand 99% of what he is talking about, it’s the methodology that I need to learn. I have been trying to set up a scan with my current broker in TOS and trying to filter the clean versus messy patterns. One chart that I see is JOB. Discounting the current price at 1.87 and speaking in terms of the chart pattern as a ‘Supernova’, the current news looks promising so even on the first ‘down day’ to consider a short here…What carries more weight, the down day or the ‘good news’ ?

    1. Most penny stocks (those under $5) don’t even have options. I think the chart carries more weight but I try to avoid shorting when I think the news is particularly good. ZAZA and ATOS both did not have good news and had bigger spikes

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