iTalk, Inc. (OTCBB:TALK) Still Presents a Danger

I first wrote about iTalk, Inc. (OTCBB:TALK) on May 9, shortly before it crashed. While TALK is now trading about 50% lower, it still presents a danger to novice investors.

Yesterday TALK closed up 9.49% at $0.9799 per share. The volume was a little over 3.2 million shares.

The more experienced pump players probably got in and out before the crash bagging some decent profits. However, with all the hype around TALK, there are bound to be some traders new to the penny stock markets who aren’t fully aware of what the deal is with this company.

Short version – TALK is a pump scheme and at nearly a dollar per share there’s plenty of room for it to sink. As mentioned in a previous article, the group touting TALK was also the group who pumped Green Innovations Ltd. (OTCBB:GNIN) earlier this year.

GNIN ran to more than $2.60 per share (split-adjusted) before crashing for the first time. Then it bounced to nearly $1.80 in March and it’s now trading around $0.50.

How could novice traders identify such pump jobs? One thing to look out for is companies that started trading around the time newsletters start touting them. Another thing – forwards splits before the stock has started active trading.

Both TALK and GNIN, as well as pretty much all the big insider enrichment schemes, have those in their history. When you know how this type of scheme works, with a little due diligence you can spot one pretty easily.

At some point a shell public company is established. It claims it has some business plan which it never realizes, but shares are sold to private investors before the stock is traded on the public market.

In the case of TALK it was 700 thousand shares sold to different unnamed parties at $0.05 on April 10, 2007. Back then the company was called Sopac Cellular Solutions, Inc.

After that the company did nothing but slowly burn through the $35 thousand raised from the sale of the shares, until December 2012 when it merged with a subsidiary, changed its name and ticker symbol, and effected a 25 for 1 forward split.

After the split the aforementioned unnamed parties held 17.5 million shares, which they had acquired for $35 thousand or at $0.002 per share. At yesterday’s closing part those shares were worth about $17 million. At the high before the crash they were worth twice as much.

To get to that point from the forward split, all that those parties needed was people willing to buy their shares. That’s where the company’s optimistic press releases and the pump newsletters and tout reports come in, and that’s where pump players got to make some cash and some novice investors got burned.

With many schemes, there are people who actually believe that the company is going places, and those are the people who lose the most. With all that in mind, it shouldn’t be hard to figure out where TALK is going, and why it presents a danger.