Jul 20 2013

Taking a HAIR Cut

Category: UncategorizedMarcus @ 9:06 pm

Like most people who have been online for a while I get a fair amount of spam. I’ve been using nukesoft.co.uk since 2000 and houlden.org (I think) since 2010. Not as long as some but quite a while nonetheless. Most of the spam is the usual fake pills (would there be such a demand if the US had UK-style prescription charges rather than having to pay the full commercial rate for medicines?), virus-infected attachments, phishing attempts, dodgy pr0n sites, and so on. Then we have the pump and dump/boiler room stuff. What happens with these is that some ne’er do wells pick some stock worth less than US$1 (penny stocks) a share that hasn’t seen a lot of action, buy a load of shares at a very low price, and then send out loads of emails telling people to buy it with the prospect of massive gains on a certain date. A tiny number of people do buy these shares, causing the price to rise sharply, then the scammers sell their shares, making a large profit and causing the price to plummet. The marks who were taken in are then stuck with loads of worthless shares they can’t get rid of.

Normally a pump & dump campaign lasts for a couple of weeks before going quiet. However I noticed one campaign kept coming back over several months. This was for a company called Biostem US Corp, symbol HAIR. The idea of the company was to use stem cell research as a means of treating hair loss, presumably explaining their stock symbol. I’m not qualified to say if it sounds a plausible anti-baldness technique, but that’s neither here nor there. Because HAIR spam keeps coming and going I decided to look into it and found out its roots, so to speak. The earliest share price I could find was 3rd Feb 2010 when they went for $341 a share. There’s a few gaps in the share data but by the end of 2011 it was only $30. In 2012 they started to do things so the share price started to rise. There were also a couple of spikes, one on 5th Jan 2012 when it went up to $333 and immediately dropped to $100 on the 9th, and from 26th April when it rose from $67 to $470, and then fell to $111 on 10th May, which are characteristic of pump & dumps.

After another spike in June 2012 the price stayed flat for a while and then collapsed down to $3.05 in November. Very interesting in Feb 2013 when some scammers were arrested and charged with fraud for inflating the price. One of those scammers was the company’s CEO. Ouch. At about the same time the share price also had a slight rise, from $0.51 to a peak of $1.01 and then down to $0.10. That’s a pump & dump. There were a few more these over summer, but there won’t be any more. On 16th July the share price closed at $0.21. Then on the 17th Biostem announced that they were suspending all operations, firing all staff, and closing everything down. On the 19th their share price was $0.045, and from that there’s no going back. Various spams reckon it will hit as much as $1.40. Sure they will. In their final financial statements they mention:

  • $148 in cash, $4 thousand in total assets
  • $760 thousand in current liabilities
  • $4 thousand in quarterly revenue
  • $579 thousand in quarterly net loss

They were also late with mandatory SEC filings. Ouch again.

Presumably people wouldn’t send out spam like this if they didn’t work, but why would people be so greedy or gullible to buy shares without bothering to carry out basic research?

Some links about HAIR/Biostem:

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