Research Driven Investor Pump of VelaTel Global Communications, Inc. (PINK:VELA) Fails

In yesterday’s session VelaTel Global Communications, Inc. (PINK:VELA) closed a further 36% down on huge volume. This drop comes after another slip on Tuesday when VELA closed 23% down. The movement was caused by a paid pump run by Research Driven Investor that is now over.

Research Driven Investor, a pumper party that was paid $50 thousand to promote VELA stock, started touting the company’s supposed merits on Dec. 14. We previously covered the stock as it was gaining momentum and was still moving up, warning investors of the potential danger involved. Predictably, the pump stopped and the stock crashed hard.

VELA issued share purchase warrants for more than 4 million shares at $0.02 per share as well as a further 5 million common shares, as settlement of debt in late November. There’s no way of knowing for certain whether the option holders exercised their purchase rights and then started to offload their shares at a huge profit once the promotion brought the price up to 20 cents but it’s a very possible scenario, one leaving regular investors buying now in a hugely disadvantaged position. There was a further 2.6 million shares issued to Ironridge Holdings, the company that supposedly provided financing to VELA, and those came in the wake of four previous issuances of nearly 11 million common shares, resulting in massive dilution for regular shareholders.

While it’s not too clear who dumped what, VELA‘s price has lost more than 50% of its worth in just two trading sessions on huge volume, despite the company claiming to have secured $12 million in financing from Ironridge by selling Series B preferred stock.

VELA was in a poor financial condition as of their latest financial report dated September 2012:

• $280 thousand in cash
• $26 million in current liabilities
• $2.1 million revenue up to Q3 of 2012
• $9.4 million net loss up to Q3 of 2012

Even with an injection of $12 million which is potentially dilutive to common shareholders, VELA is still neck-deep in debt and generates millions of net loss per year.

Pumpers Research Driven Investor previously ran other terrible pump jobs on companies such as Wikifamilies, Inc. (PINK:WFAM). Following the pump of WFAM, the stock crashed and is now barely trading at $0.01, dragging down everyone who bought at the pump price of $0.40.

Traders are advised to do their own research and be very careful with promoted stocks as any paid pump is very risky ground and may burn even the most savvy of day traders.