Apr 13

An Introduction to shelf registrations

Probably the most common kind of way of issuing and registering new stocks is a shelf registration. This is filed on SEC Form S-3 (F-3 if the issuer is a foreign company). These can be used with multiple types of offerings, including most commonly PIPEs, Private Investments in Public Equities, where the shares have been sold to an investor and the shares are now being registered so that investor can sell those shares; ATMs or At the Market Offerings (PDF), where a company sells shares into the open market from time to time; and registration of shares underlying warrants or convertible bonds.

Shelf Takedowns by Greenberg Traurig (PDF)
FAQs about Shelf Offerings by Morrison Foerster (PDF)

Besides the actual shelf registration statement, the company has to file a prospectus supplement within two days of whichever comes first, the offering being priced or the shelf registration being used. Also, just because a shelf registration is filed does not mean it can be used immediately — the registration needs to be declared effective after the SEC reviews the registration. This typically takes two to three weeks from when the registration statement is filed. When a shelf registration (or another registration statement) has become effective a form EFFECT will be posted. For example, here is a shelf registration, prospectus, and EFFECT for Diana Containerships (DCIX):


Disclaimer. No position in any stocks mentioned and I have no relationship with anyone mentioned in this post. 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.

Mar 24

Who is behind Kalani Investments Limited?

[Edit 13 April 2017: a shipping industry magazine article has unmasked the Canadian investors behind Kalani]


Who is behind Kalani Investments Limited? The short answer is I don’t know. I thought it worthwhile to at least try looking the British Virgin Islands (BVI) company behind toxic financings of Dryships (DRYS), TopShips (TOPS), and Diana Containerships (DCIX). For $30 I found out only two things: the company was registered by TMF BVI Limted of Palm Grove House, PO Box 438, Road Town, Tortola, BVI (a registered agent / legal firm that specializes in this kind of thing) and it was registered on March 24, 2016. As expected, the filings didn’t reveal any of the people who actually own the company and run it. I have uploaded the documents I received from the BVI corporation register. Kalani’s company number is 1909877.

Registration details (PDF)
Certificate of Incorporation (PDF)
Articles of Association (PDF)
Pre-Incorporation transactions (PDF)

Per the most recent TopShips 6-K (page 27) John Gordon from Hassans is the representative of Kalani (and again, this is just a law firm to hide who owns and controls Kalani):

Kalani Investments Limited
Palm Grove House
P.O. Box 438
Road Town, Tortola
British Virgin Islands
Facsimile: +350 20077343
E-mail: [email protected]
Attention: John Gordon

and apparently Kalani’s law firm is Greenberg Traurig:

Greenberg Traurig, LLP
The MetLife Building
200 Park Avenue
New York, New York 10166
Facsimile: (212) 801-6400
Email address: [email protected]
Attention: Anthony J. Marsico, Esq.
In a form 6-K from Diana Containerships John Gordon is also the signatory for Kalani and is described as a director of Kalani.

Disclaimer. No position in any stocks mentioned and I have no relationship with anyone mentioned in this post. 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.

Mar 10

Some good posts on offerings and fundamental research

These come from Auspex Research on Twitter. Follow him. He has no blog but he does occasionally post longer thoughts on Twitlonger.

A Gevo Inspired Twitlonger (10 June 2016)
When A+B = D (17 November 2016)
Realtime Analysis using Twitlonger (22 November 2016).

Disclaimer. No position in any stocks mentioned and I have no business relationship with Auspex (I don’t even know his real name). 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.

Dec 02

Dan & Carol Get busted!

Here is a nice investigation into the former stock promoters Dan Ryan, Carol McKeown, Eric Van Nguyen, and money man Tony Papa. Keep in mind that Dan and Carol, while coming off as sympathetic figures, ran a stock promotion business and are alleged to have violated US laws. Before the SEC sued them I alleged the same thing and they put out a PR threatening me with a libel lawsuit (that PR is no longer available online).


Disclaimer. No positions in any stock mentioned. Dan and Carol never followed through on their threat to sue me. 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.

Nov 18

Catalysts in the trading of bankrupt companies and why Republic Airways $RJETQ is going to zero

The rule of thumb in bankruptcy is that 90% of the time shareholders get completely wiped out. Maybe 8% of the time shareholders get a tiny bit of equity in the new (post-bankruptcy) company or out of the money warrants to buy that equity. Only 2% of the time or less do shareholders get a large recovery. Of course, that 2% of the time is what gives hope to shareholders in the 98% of bankruptcies. General Growth Properties (GGP) is a good example from the 2008 financial crisis and American Airlines (AAMRQ at the time) is a more recent example from 2014. A current company in bankruptcy where it is possible that shareholders may get a meaningful return is Peabody Energy (BTUUQ); the current price values the equity at $250 million although the company still says that shareholders will be wiped out. Peabody has yet to file a bankruptcy plan; it has been granted an extension by the court until December 14th. [The above paragraph has been edited to specify that a meaningful return for equity holders is possible; a prior version said it was probable.]

There are a few key events in a bankruptcy proceeding that should drastically affect the stock. First, the bankruptcy filing, which almost always crushes the stock although in cases where that was expected the drop may be 30% rather than 80%. The next event is the formation of an equity committee (or rejection by the judge of an equity committee): this indicates a meaningful probability of shareholders receiving something and not getting completely wiped out. Next comes the filing of the bankruptcy plan, which lays out how much different classes of creditors and equity holders will get. For various reasons the bankruptcy plan is often changed or amended multiple times. Next comes the vote on the bankruptcy plan and approval by the judge: if the plan is approved then the bankruptcy will become ‘effective’ shortly thereafter. The effective date is usually not known more than a few days in advance and it should come a couple weeks after the plan is approved. On the effective date the bankruptcy is closed, old shares are wiped out, and new equity is distributed to creditors.

It is important to note that there are other (less common) ways that a bankruptcy can end: the old equity can remain after essentially all the assets have been sold with the proceeds going to the creditors (this is what happened recently with Saratoga Resources (SARA), and in this case the equity essentially owns a shell company).

Shareholders of a bankrupt company can keep the stock price at an unrealistic level even when they are likely to get wiped out. However, the events mentioned above tend to be catalysts for sending the stock price towards its fair value.

Here is a chart of Cosi (COSIQ); the big down day is when the company declared bankruptcy.


Next is the chart of C&J Energy (CJESQ) — November 4th in premarket the bankruptcy plan was revised to give shareholders 2/3 fewer warrants in the new equity.

The evening of November 4th the judge denied the request for formation of an official equity committee.



Here is the chart of Republic Airways (RJETQ): the bankruptcy plan was filed after-hours on 11/16/2016. The plan calls for shareholders to be completely wiped out and get nothing.


Next is the chart of Hercules Offshore (HEROQ) with the big drop on November 1st coming after the judge approved the bankruptcy plan:

The final even in bankruptcy is the effective date. As I stated above this is not known far in advance — it depends on if there are any objects or delays after the plan is confirmed. Below is the chart of Arch Coal (ACIIQ; the post-bankruptcy stock trades as ARCH). On September 30th the company filed an 8-K stating that the effectiveness date was anticipated as being October 5th. The stock promptly dropped bigly.


Republic Airways (RJETQ) and understanding a bankruptcy plan

An official equity committee was never approved by the judge because unsecured creditors were set to lose over 50% so the likelihood of equity holders getting any recovery was very low. The evening of November 16th a bankruptcy plan was finally filed. You can see the bankruptcy court docket for free. To find free bankruptcy court dockets, just Google “[company name] bankruptcy docket”. The various corporate bankruptcy trustees all make these available. In the case of Republic Airways, docket 1089 is the bankruptcy plan and docket 1090 is the plan disclosure statement.

The most important part of the bankruptcy plan is the listing of claimant classes and what they will receive at the confirmation of the plan. Here is that list for Republic:


Interests in RAH include the stock of Republic; but don’t take my word for that: the first part of the plan has definitions of all the relevant terms.

From page 9:

“Interest” means any equity security within the meaning of section 101(16) of the Bankruptcy Code including, without limitation, all issued, unissued, authorized or outstanding shares of stock or other equity interests (including common and preferred), together with any warrants, options, convertible securities, liquidating preferred securities or contractual rights to 16-10429-shl Doc 1189 Filed 11/16/16 Entered 11/16/16 18:56:36 Main Document Pg 14 of 68 10 purchase or acquire any such equity interests at any time and all rights arising with respect thereto.

From page 13:

“RAH” means Republic Airways Holdings Inc., a Debtor in these Chapter 11 Cases.

Page 25 has the details of how interests in RAH will be treated (emphasis mine):

i. Interests in RAH (Class 5) i. Impairment and Voting. Class 5 is impaired under the Plan. Holders of Interests in RAH are deemed to reject the Plan under section 1126(g) of the Bankruptcy Code and are not entitled to vote on the Plan.

ii. Treatment. Upon the Effective Date, all existing Interests in RAH shall be deemed cancelled and extinguished and the holders of such Interests shall not receive or retain any property on account of such Interests under the Plan.

If that isn’t clear enough, look at page 92 of the disclosure statement (emphasis mine):

2. Consequences to Holders of Existing Interests in RAH Holders of interests in RAH, which are being cancelled under the Plan, will be entitled to claim a worthless stock deduction (assuming that the taxable year that includes the Effective Date of the Plan is the same taxable year in which such stock first became worthless and only if such holder had not previously claimed a worthless stock deduction with respect to any Interest  in RAH) in an amount equal to the holder’s adjusted basis in the Interest. If the holder held its Interest in RAH as a capital asset, the loss will be treated as a capital loss.

Republic stock gapped down after that bankruptcy plan was filed but thankfully bounced enough for me to short over $0.50. Considering that the company stated in a press release then that it expects to emerge from bankruptcy in the first quarter of 2017 and that the borrow rate on RJETQ at Interactive Brokers is under 4% APR (effectively 12% because that is calculated on short collateral), I continue to believe that RJETQ is a good short. I expect the stock to slowly fade over the coming two months and drop under $0.10 once the plan is confirmed.

Disclaimer. I am short RJETQ and may add to or cover my short at any time. I have traded all the other stocks mentioned but currently have no positions in them. 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.

Oct 07

My Trading computer

I figured I might as well update an old blog post about my trading computer. Now, when it comes to trading, having a fast computer is a lot like having a big penis when it comes to sex: sure it is nice, but knowing how to use it matters much more, and the most important thing is just having a tool that is adequate.


First, the most visible part: I have 8 monitors, with the bottom center two monitors being the same ones from 7 years ago; the rest of the monitors are 22″ to 24″ monitors of various makes. Frankly, monitor quality doesn’t matter for trading so a cheap monitor of decent quality is fine. My monitor stands are a hodge-podge and if I did this over again I would make the monitors all the same and put more thought into proper monitor stands. I have Ergotron quad-monitor stands holding the four bottom monitors. Each of the upper-row monitors is held by its own Atdec monitor pole.

Besides the monitors, the most important part of my computer (not shown) is the APC Pro 1000 UPS — If I lose power I want to be able to have enough time to close out day-trade positions. I have only two monitors and the CPU on the UPS. I have a separate UPS for my internet router and wifi access point.

As to the guts of the computer, I just upgraded to something that is insanely overpowered. Keep in mind that I do some things that are very CPU-intensive that most other traders never do. Here are the specs:

ASRock X99 Extreme4 LGA 2011-v3 Intel X99 SATA 6Gb/s USB 3.0 ATX Intel Motherboard (one of the cheaper LGA 2011-3 motherboards)
Intel Xeon E5-2680V4 Broadwell 2.4 GHz 14 x 256KB L2 Cache 35MB L3 Cache LGA 2011-3 120W BX80660E52680V4 Server Processor
64GB Kingston HyperX Fury (4 x 16G) DDR4 2133 Desktop Memory DIMM (288-Pin) RAM HX421C14FBK4/64
SAMSUNG 950 PRO M.2 512GB PCI-Express 3.0 x4 Internal Solid State Drive (SSD) MZ-V5P512BW (I strongly recommend NVME M.2 solid state drives over other SSDs or hard drives — they are so much faster)
eVGA GEFORCE GTX 970 SC+ ACX 2.0+ (I have two of these; they are about one year old but I saw no need to upgrade)

The most expensive parts of the computer by far are the CPU which has 14 cores and cost $1700 and the two video cards (each with 4 monitor outputs) that cost $300 each. I could easily get similar performance by overclocking a high-end desktop processor but that generates extra heat (already a problem for me in my office in the summer) and risks making the computer less stable. While none of the programs I run require a super-fast processor, I run a lot of programs so having many cores is useful. However, almost any other trader would be fine with a quad-core Skylake processor and 95% of the time my prior six-core processor was fine for me in the past (but I will be requiring a lot more of my CPU presently).

Disclaimer. I have positions in some of the stocks that are shown on my screen and I may close or add to those positions at any time. I subscribe to all the chatrooms and news services shown on my monitor. 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.







Sep 06

Trading in promoted stock Preston Corp $PSNP suspended by SEC

Friday morning the SEC suspended trading in Preston Corporation (PSNP) which had just been promoted by OTCMagic.com the prior evening. The reason given by the SEC:

The Commission temporarily suspended trading in the securities of PSNP because of questions regarding the adequacy and accuracy of available information about Preston Corp. in light of a false statement about the permitting status of a mine in the company’s August 10, 2016 press release and questions regarding the adequacy and accuracy of clarifications Preston Corp. provided in a September 1, 2016, press release about the mining project.

SEC trading suspension (PDF)
SEC trading suspension order (PDF)

PSNP should resume trading at the open on September 19th.


There is also an online landing page promoting PSNP at http://theprofitletter.com/psnp/index.html (PDF copy for posterity).

Disclaimer from landing page (emphasis mine):

LEGAL DISCLAIMER: Past performance does not guarantee future results. The information contained herein might contain “forward-looking” statements and/or information regarding expected growth of a public company. In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, the publisher notes that all information other than historical information, including statements contained herein that look forward in time, involve risks and uncertainties relating to the company’s actual results of operations. “Forward-looking” statements are based upon expectations, estimates and/or projections at the time the statements are made and involve risks that could cause actual events to differ materially from their anticipated unfolding. “Forward-looking” statements may be identified through the use of words such as expects, will, anticipates, estimates, believes, or by statements indicating certain events may, could, should, or might occur. Any statements that express or involve expectations, beliefs, predictions, plans, projections, objectives, goals or future events or performance may be “forward-looking” statements. Factors that could cause actual results to differ include, but are not limited to, the company’s ability to fund its capital requirements in the near term and the long term, the size and growth of the market for the company’s products and services, regulatory approvals, pricing pressures and other risks detailed in the company’s reports filed with the Securities and Exchange Commission. Securities investment is inherently speculative, carries a degree of risk, and may result in the loss of invested capital. The publisher has relied upon historical information and third-party sources in the evaluation of the company Preston Corporation (hereinafter “Preston”). This paid advertisement does not purport to provide a comprehensive analysis of any company’s financial position, operations, or prospects and this is not to be construed as a recommendation, offer or solicitation to buy or sell any security. All information herein is provided for entertainment purposes only and should not be relied upon when making an investment decision. The dissemination of this information might increase public awareness for Preston and thereby be considered a conflict of interest for the paying party or paying parties for this advertisement. Although the information contained within this advertisement is believed to be reliable as of the time of publication, there are no warranties as to the accuracy of any of the content herein and no advice is given as to how readers should or may choose to utilize its content. The information contained herein is based exclusively on information generally available to the public. Readers should perform their own due diligence before investing in any security, including consultation with a qualified and registered investment advisor or analyst within their residential jurisdiction. Furthermore, readers should independently verify all statements made in this advertisement and perform extensive due diligence on this or any other advertised company. The authors and/or endorsers and/or publishers of this advertisement might have received compensation for this and/or related marketing materials relating to Preston. More information can be retrieved from Preston’s corporate website. Furthermore, Preston’s financial information, filings and disclosures can be found at the Securities and Exchange Commission website at www.sec.gov, or appropriate regulatory agency in foreign countries. No one featured in this advertisement represents himself or herself to be a registered investment broker, advisor, or dealer of financial securities. This is not an offering of securities for sale. An offer to buy or sell securities can be made only with accompanying disclosure documents and only within the states and provinces wherein such an offer is acceptable for sale. This advertisement is not intended for readers in any jurisdiction where such advertising is not permissible by local regulations, and readers in those jurisdictions should therefore disregard it. Research and any due diligence was conducted by an outside researcher during the creation of this advertisement. Readers should consult with a qualified and registered investment advisor prior to investing in any securities, and they should thoroughly review the financial statements and other corporate filings about any companies in which they have an interest in investing. Many states have established rules requiring the approval of a security for sale by a state security administrator. Check with www.nasaa.org or call your state security administrator to determine whether a particular security is licensed for sale within your jurisdiction. This stock profile should be viewed as a paid advertisement. The publisher, The Profit Letter, understands that in an effort to enhance public awareness of PSNP and its securities through the distribution of this advertisement. Craigburn Corp. paid all of the costs associated with creating, printing and distribution of this advertisement. Craigburn Corp. is managing a production budget of up to three hundred thousand dollars. The publisher was paid the sum of two thousand five hundred dollars for his contributions. If successful, this advertisement will increase investor and market awareness, which may result in increased numbers of shareholders owning and trading the common stock of PSNP, increased trading volumes, and possibly increased share price of the common stock of PSNP. The publisher has not undertaken to determine if Craigburn Corp. is, or intends to be in the future, directly or indirectly, a shareholder of PSNP. The publisher may receive revenue, the amount of which cannot be determined to any degree of certainty, as a result of this advertising effort and the accompanying subscription offer. This publication is not, and should not be construed to be, an offer to sell or a solicitation of an offer to buy any security. This publication, its publisher, and its editor do not purport to provide a complete analysis of any company’s financial position. The publisher and editor are not, and do not purport to be, broker-dealers or registered investment advisors. Any investment should be made only after consulting a professional investment advisor and only after reviewing the financial statements and other pertinent corporate information about the company. Further, readers are advised to read and carefully consider the Risk Factors identified and discussed in the advertised company’s SEC filings. Investing in securities, particularly micro cap securities such as PSNP, is speculative and carries a high degree of risk. Past performance does not guarantee future results. This publication is based exclusively on information generally available to the public and does not contain any material, non-public information. The information on which it is based is believed to be reliable. Nevertheless, the publisher cannot guarantee the accuracy or completeness of the information. This publication contains forward-looking statements, including statements regarding expected continual growth of the featured company and/or industry. The publisher notes that statements contained herein that look forward in time, which include everything other than historical information, involve risks and uncertainties that may affect the company’s actual results of operations. Factors that could cause actual results to differ include the size and growth of the market for the company’s products and services, the ultimate degree of success in the company’s business strategy rollout, the company’s ability to fund its capital requirements in the near term and long term, pricing pressures, etc.

Disclaimer. I have no position in any stock mentioned above. 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.

Aug 26

Trading in promoted stock MarilynJean Interactive $MJMI suspended by SEC

This morning the SEC suspended trading in MarilynJean Interactive (MJMI), which had recently been promoted by websites connected to the former Awesomepennystocks.com. The reason for the suspension was:

The Commission temporarily suspended trading in the securities of MJMI because of recent, unusual and unexplained market activity in the company’s stock taking place during a suspicious promotional campaign. This order was entered pursuant to Section 12(k) of the Securities Exchange Act of 1934 (Exchange Act).

SEC trading suspension (PDF)
SEC trading suspension order (PDF)

MJMI should resume trading at the open on September 12th. It was promoted by Mysoaringpennystocks.com and Risingpennystocks.net. See more info on the company at Promotion Stock Secrets.


Disclaimer. I have no position in any stock mentioned above. 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.

Aug 05

The market for penny stocks is rarely efficient: Jet.com vs Jetcom

With the news that Wal-Mart is looking to buy Jet.com coming out two days ago, some geniuses looked to buy Jet.com to profit from the potential buyout. The problem is that Jet.com is not publicly traded anywhere. However, they found Jetcom, which is publicly traded on the grey market OTC (so no bids or offers are shown and market makers can’t make a market).

A quick look at the description of Jetcom (JTCMF) on OTCmarkets.com shows that it is definitely not the same company as Jet.com: it is reported to have been founded in 1968 and had a market cap of about $2 million as of two days ago. The company’s website is also defunct (Jetcom.com), the company’s address is in Canada, and its business description is “communications and media – cable and entertainment.”

Still, this minimal amount of due diligence proved too much for many traders and at its peak today JTCMF was up 2000% at $2.00 per share, up from $0.10 three days ago. Unfortunately because it trades on the grey market I cannot short JTCMF at Interactive Brokers; otherwise I would have shorted it. This is not the first time something like this has happened and won’t be the last. The most recent similar situation was Riviera Tools (RIVT). During its dumb run trading in RIVT was suspended by the SEC so there is a good chance of that happening to JTCMF.

[Edit August 8th: I see now that JTCMF was halted shortly after I published this blog post at 11:55 AM on August 5th. Meanwhile, Wal-Mart (WMT) has confirmed that it is buying Jet.com for $3.3 billion]

Disclaimer: 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.


Jul 09

Samuel DelPresto and how to run big pumps and dumps

I never got around to blogging about this but did follow the case closely and had uploaded the plea agreement and indictment in this case. A good summary of the case is here. So here are the links:

Samuel DelPresto guilty plea agreement (PDF)

From the plea agreement:

If DELPRESTO enters a guilty plea and is sentenced on this charge, and otherwise fully complies with all of the terms of this agreement, this Office will not initiate any further criminal charges against DELPRESTO for his involvement in stock market manipulation schemes between in or about 2007 to in or about 2013 involving the publicly traded stock of the following companies, among others: Kentucky USA Energy, Inc., (“KYUS”); Mesa Energy Holdings, Inc. (“MSEH”); Bioneutral Group, Inc., (“BONU”); Clear-Lite Holdings, Inc., (“CLRH”); NXT Nutritionals Holdings, Inc., (“NXTH”); Empire Post Media, Inc. (“EMPM”); Mustang Alliances, Inc. (“MSTG”); IDO Security, Inc. (“IDOl”); Brainy Brands Co., Inc. (“TBBC”); Premier Brands Inc. (“BRND”); and LTS Nutraceuticals, Inc. (“LTSN”).

That is a very impressive list of pump and dumps.

Charges against Samuel DelPresto (PDF) — For some reason this is not called an indictment but it reads like one. It has a good explanation of how the pumps and dumps worked.

The SEC also filed a civil lawsuit against DelPresto.

Interestingly in light of the recent plea deal by the former head trader at BMA Securities (market maker BMAS on the OTC), the accounts listed for forfeiture include one account at BMA Securities. I have no evidence indicating anyone at BMA Securities was involved with DelPresto.


Disclaimer. I have no position in any stock mentioned above. 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.

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