Petrosonic Energy Inc (OTCMKTS:PSON)’s Free Fall Continues
“Trust no one” is a motto that a lot of traders follow in Pennyland. We reckon rightly so, but there are still those who are willing to believe just about anything they see in an email and on a paper brochure and when you put the name of a famous financial journalist into the equation, the excitement levels jump through the roof. The only problem is, as Petrosonic Energy Inc (OTCMKTS:PSON)’s stock performance from the last couple of days illustrated, things usually end up pair-shaped.
Before we delve into the details, let’s say a couple of words about paid pumps in general. The most common type is the one through the emails. It is characterized by, in most cases, a large number of newsletters sending out bright promises of future potential gains from companies that usually have nothing to show in terms of operations or financials. The compensation is often not that dramatic and the duration is usually shorter. In some cases, the crash ensues as soon as the emails are sent as US Energy Initiatives Corp Inc (OTCMKTS:USEI) showed us yesterday. There are however, a different type of stock promotions – the ones through the snail mail. Basically, a colorful brochure is delivered directly to our P.O. box saying that a company worth less than $1 per share will make you extremely rich. The compensation for the paper mailer pumps usually amount to more than $1 million and just like Biozoom Inc (OTCBB:BIZM) have been showing us over the last couple of weeks, the ascend lasts for a while and the inevitable crash is usually more gradual.
The people who badly wanted to pump PSON went for the second option and they shed a total of $3 million on the whole thing. The pumpers even paid Mr. Tobin Smith, a news contributor for Fox News, $50 thousand to say a few kind words about PSON which made the whole thing sound extremely credible.
Naturally enough, Fox News weren’t amused when they found out and Mr. Smith was promptly fired. Some websites even argue that his career is over and although we’re not here to discuss Mr. Smith or his future professional development, the scandal had a massive effect on PSON‘s performance which is what interests us the most. On Tuesday, they lost around 23% of their value and yesterday, the free fall continued when they wiped out a further 19% on trading volume amounting to 4.4 million shares. The logical question right now is: “Do PSON have what it takes to go through the turmoil?”.
The press releases that have been coming out in the recent weeks certainly sound promising. PSON have been talking about a stream of revenues coming in, plants being set up and plans for future growth. Unlike other promoted penny stocks with puportedly ground-breaking technology PSON do seem to have the advantage of a relatively strong financial statement with lots of cash on hand and relatively little in terms of debt.
Some questions do arise however, when you consider the fact that they acquired the 60% ownership of their Albanian subsidiary from another publicly traded venture called Sonoro Energy Ltd (CVE:SNV). SNV‘s shares are listed on the Toronto Stock Exchange and we can see that they have generated no revenue since inception and the stock is traded at less than $0.05. Things get even more dubious when you find out that the current CEO of PSON, Mr. Art Agolli, also acted as a consultant for Sonoro as well as a few other Canadian ventures.
The biggest problem for PSON right now, however, is the fact that the scandal with Mr. Tobin Smith and the aggressive pump campaign have shattered the credibility of the company in the eyes of many investors. If the touting continues, we might see some more buying action from inexperienced investors, but we reckon that no matter how many years you’ve spent dealing with penny stocks, a thorough research and a lot of due diligence is absolutely crucial before making any investment decisions. Unless you want to lose your money, that is.
