I sell a newsletter (Kirk Lindstrom's Investment Newsletter) and would never want to stake my reputation on a single penny stock that had been in a long term down-trend. Also, I have never been paid by anyone to give away my top stock pick for free (without subscribing) so I was quite interested to see why a competitor would do this at what must have been a very high price for the mailing.
At today's price of $0.84, QPCI is up significanty from the listed date of the profile in the mailing.
The 20 page "advertisement" gives the following information for QPC:
- Current Price (as of 3/14/08) $0.54
- Low Projection $1.50
- High Projection $2.50
You can see on the graph that QPC was already up about 50% since the advertised "recommendation" at $0.54. This sort of momentum often attracts more buyers. For penny stocks, often someone pays to pump a low priced stock at a low price so the "pumpers" can dump their shares into the buying frenzy. I am NOT saying this is the case here, but I would want to know more before buying any shares.
If this stock is his top technology stock for 2008, then why is Bill Mathewes giving the pick away for free before you pay him for a subscription? Reading the "disclaimer in fine print" on page 17 of this 20 page advertisement, I found the following:
Disclaimer: The CHEAP Investor (Bill Mathews' newsletter) is an independent paid circulation newsletter. This mailing piece is a solicitation for subscriptions. This company was chosen to be profiled after The CHEAP Investor completed due diligence on the company. The CHEAP Investor received twenty thousand dollars ($20,000) as an editorial fee and expects to generate new subscriber revenue, the amount of which is unknown at this time. CDMG, the marketing vendor, participated in writing and publishing this report. QPCI, the issuer, paid $559,434.97 to the marketing vendor, to pay for all the costs of creating and distributing this report including printing and postage in an effort to create awareness about this company.This is not a typo. The mailed advertisement says QPCI paid $559,434.97, over half a million dollars, to the marketing vendor to "market" the stock!
I also found this online at one of the links given in the mailing:
Disclaimer: The CHEAP Investor (Bill Mathews' newsletter) is an independent paid circulation newsletter. This online report is a solicitation for subscriptions. This company was chosen to be profiled after The CHEAP Investor completed due diligence on the company. The CHEAP Investor received twenty thousand dollars as an editorial fee and expects to generate new subscriber revenue, the amount of which is unknown at this time. CDMG, the marketing vendor, participated in writing and publishing this report. QPCI, the issuer, paid thirteen thousand, eight hundred dollars to the marketing vendor, to pay for all the costs of creating and distributing this report online in an effort to create awareness about this company. The marketing vendor holds no securities of the company, and intends to not acquire any securities of the company. This publication does not provide an analysis of a company’s financial position. QPCI’s financial position and all other information regarding QPCI should be verified with the company. Information about many publicly traded companies and other investor resources can be found at the Securities and Exchange Commission’s website at www.sec.gov. This online report should not be construed as investment advice. Investing in securities is speculative and carries risk. It is recommended that any investment in any security should be made only after consulting with your investment advisor and only after reviewing all publicly available information, including the financial statements of the company. This online report is not intended to be, nor should it be construed as, an offer to sell or a solicitation of an offer to buy securities. The CHEAP Investor presents information in this report believed to be reliable, but its accuracy cannot be guaranteed.How many subscriptions at $149 will Bill Mathews have to sell to equal what he was paid to profile QPC?
- $20,000 fee / $149 per new subscription
- Market Cap $32.5M
- EPS -$0.251
It lost 25¢ a share in the last year.
- Revenue $9.93M
- Debt $12.1M
- Book Value -$0.261
- UNGAR JEFFREY 3,832,060 as of 18-Sep-07
- FINISAR CORP 3,784,778 shares as of 10-Mar-08
If one of the leading fiber optics companies and the number two shareholder has sold a significant number of shares and QPC Lasers felt a good use of $559,434.97 was to market the company rather than hire some engineers, then I would not be a buyer of QPCI here at $0.84 unless you use a very tight stop loss and be very wary of a possible "pump and dump" scheme.
Often small companies will pay 6% or more to investment banks to raise capital through a special offering of new shares but I did not find any press releases about this.
The chart looks like it may have bottomed and there are many positive press releases that announce new patents and new hires, but it seems rather odd to spend so much money to "market a stock."
Disclaimer. I personally own and recommended Finisar in "Kirk Lindstrom's Investment Newsletter" where I buy and sell it around a core position
Nov. 11, 2014 Update: I was correct to worry. It appears the company went under.
- From New Life for QPC Lasers :
- SYLMAR, Calif., June 8, 2009 – An unknown group of investors has bought the assets of struggling semiconductor laser maker Quintessence Photonics Corp. (QPC) Lasers Inc. for $750,000.
- In a June 3 filing with the Securities and Exchange Commission, QPC said it expects to file for Chapter 7 bankruptcy protection in the near future, and for its stock to have no value after liquidation is completed
And I was correct to recommend Finisar here and in my newsletter
I've done really well with Finisar for my newsletter subscribers
Learn the "Core and Explore" approach to investing
with "Kirk Lindstrom's Investment Letter"
Subscribe NOW and get the November 2014 Issue for FREE!