There are plenty of reasons to avoid internet stock message boards. Â One of the biggest is that’s where “pump-and-dumpers” hang out. Â They are a group of people — most ignorant, some not — who have bought into a stock at very low prices and are trying to hype the stock to get it to rise high enough for them to flip their shares. Â
The other type of people on these boards are people who were foolish enough to buy into the stock at higher prices, only to see their investment going down the tube. Â They remain steadfast, though, convinced that they are just a few months away from striking it rich.Â
One such stock is Live Current Media (OTCBB: LIVC.OB). Â This pink-sheet stock owns a bunch of domain names. Â That’s it. Â They sell product through one of them, and have been trying to develop others. Â Unfortunately, it’s a flawed business model. Â Domain names have no intrinsic value. Â They only have value if they are developed and monetized, which is a lot harder than it sounds. Â The lesson though, is not about the company so much as the messages on the stock board. Â What you find it a group of cheerleaders who, when pressed to provide specific reasons and financial analysis for why they think the stock has value, avoid the question. Â
When someone comes on the board to lay out a specific case against the stock, he is razzed and jeered at — rather than engaged in intelligent dialogue. Â That alone should tell you what you need to know about the stock.Â On the cheerleader side you have posters Carl10231961, who makes pie-in-the-sky stock price predictions (“Going to $10!”) with no basis for the prediction. Â There’s TEXAS_stock, who ends each post with “Go Live Current’, as if it were a high school football team and him a blushing virginal senior in short skirt and tight sweater. Â
Finally there’s stock_portfolio2003, who responds to intelligent posts with scatological screeds on anyone that dares present a con argument. Â Swimming against the tide is lmsmedley, who provides detailed analysis. Â Here’s what he had to say:Â ”As the saying goes, “There is a difference between a business plan and a business”.
The basic premise of the business is questionable. There’s little evidence that an intuitive domain name translates to revenue. It takes a lot to develop & advertise a website, to offer something to people that (as Marc Cuban says) “solves a problem that someone is willing to pay for”.
Intelligent and successful investors look at what has transpired so far:
1) They have a modestly successful perfume business online, but even with this intuitive domain name, they have less than .01% of the fragrance market. Having an obvious domain name does not guarantee anything.
2) In 2008, the new managers increased their salaries FOURFOLD, raiding a cash-poor company of almost $4 million that could have been used for operations. If they had not had their own self-interest in mind, they would not have found themselves in need of raising additional capital.Â
3) What have they done to earn those inflated fees?
4) As killermyca pointed out, they made cricket agreements with no way to pay for them.Â
5) They wanted to sell 6 domain names, and sold one for $500,000 — instead of the $6 – 10 million they â€œexpectedâ€. Why? NO CAPITAL. Dreamworks canâ€™t raise the capital they needed for their new incarnation — and that’s Steven Spielberg! In addition, there is little evidence (cited above) that having an obvious domain name means anything. A savvy domain name buyer recognizes this.Â Â
6) They had to “raise” $1MM because they had already raided the coffers. 25% of this capital came from the owners — putting their undeserved salary back into the company — so they could take it out again. And did just that by firing the COO and paying him off $300,000!
7) They said they expected to raise another million within 15 days of that Nov. announcement. They did not raise a dime. Smart investors recognize all the flaw, not to mention that even secured investments can’t get funded right now!
8) Their only hope is that they attract millions to their websites during — I might add — only a six-week period. Only if advertisers are willing to put up decent money will they see any kind of revenue. Contrary to other people who seem to think advertisers will pay $20 CPM (pipe dream), they will be lucky to get $5….maybe. With FIFTY MILLION PAGE VIEWS, that would be $2.5 million. Nice, but since that amounts to LESS THAN MANAGEMENT’S ANNUAL SALARY, why would any idiot believe this will somehow make the company valuable?
9) And they are supposed to accomplish all this when advertising has been cut back by record amounts.Â
10) They have negative working capital. NEGATIVE WORKING CAPITAL, folks. That means they don’t have the money to run the business. You can have all the “plans” you want. You have to have the money to execute them.
11) They themselves have said there is substantial doubt that they will remain a going concern.These are all lessons for investors to take heed of. You should also note that when supporters, hypesters, and pumpers of a penny stock refuse to directly address these issues — especially for the most ludicrous, laughable reasons — then you have been provided with all the information you need to make an informed decision. Â Do your own due diligence.Â ”Â When someone posts an opinion that detailed, it’s worth taking note. Â When the replies don’t address any of the points but instead attack the posters character, among other things, that should tip you off.Â
Reminder: This is not a solicitation or suggestion to buy or sell any security. Â Always do your own due diligence and work with a financial advisor.Â