Beware of Stock Spam Promotion in Major Financial Publications

by: Tate Dwinnell June 07, 2007 | about stocks: GZGT.OB    

Tate Dwinnell

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A couple days ago I was reading Investors Business Daily and something caught my eye - no, it wasn't a great piece on technology trends or the next hot company. It was a full page ad from growthstockguru.com promoting a pink sheet penny stock, Guangzhou Global (GZGT.OB) !

I read a lot of financial publications and don't ever recall seeing a full length ad with the same kind of flashy promotion you get in your junk email. Is the desperation for ad dollars this great? It's unbelievable to me that respected publications like Investors Business Daily would put their credibility on the line for a few bucks like this.

And IBD isn't the only one. Apparently Forbes, Fortune and BusinessWeek were running these ads as well, but I haven't seen them. The IBD ad is right in front of me on page A13 of the Friday edition (the ad is running yet again on page A15 of the weekend edition). Shame on you, IBD and other publications, for being a part of the stock spam problem and not a part of the solution. How do you live with yourselves knowing that some of your readers may have naively jumped into this stock before the big dump?

The IBD ad ran in the Friday edition. After all the pumping from these slick ads, Guangzhou Global began the big dump with a little more than an hour to go in trading Friday. A nearly 38% drop.

GZGT Stock Spam
Chart via MSN

I would like to commend Kiplinger's for being responsible and not running these ads. According to Thomas Anderson of Kiplinger, they were also approached about it and declined. There is some interesting background in this article about the relationship between growthstockguru.com, GZGT and the advertiser as well as the financials of the company.

Some highlights:

• The editor of growthstockguru.com, Aharon Bronfman, doesn't show in a search of private and public databases. It's entirely possible this person doesn't even exist! Do a search in Google and you'll see what I mean. Fifteen years of investment experience and this guy is invisible? Also interesting to note that the website went online just days before GZGT started trading. So much for the hype in the ad that claims Aharon's three recent stock picks went on to extraordinary gains.

I've taken this a step further and uncovered the following:

• The listed address for GrowthStockGuru.com is:

Growth Stock Guru
1461 A First Avenue, # 360
New York, NY 10021-2209
USA

Google search for the address 1461 A First Avenue, #360, New York, NY 10021-2209 you start seeing other unsavory companies with the same address such as a "Witherspoon, Seymour & Robinson Inc.," which looks to be a fairly shady company in its own right.

• Is it coincidence that another investing site tradesoeasy.com with rumored links to a german spammer has the same address? I think not. It appears that the address used by growthstockguru.com and many other unscrupulous companies is some sort of address forwarding service.

It's unclear just who owns what and all the parties behind the pump and dump scheme. But the bottom line is that Business Week, Forbes, Fortune and Investors Business Daily, whether they realized it or not, all were a part of that. That is mighty disturbing. Could they not do a simple background check as I have done and realize this was most likely a classic pump and dump scheme? Or was the desperation for ad dollars too great to pass up?

I don't have the time or resources to research this any further, but the moral of the story is to be careful out there avoid those pink sheet stocks!

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This article has 5 comments:

  •  
    Jun 12 08:55 AM
    Thank you for this excellent expose. I generally ignore "penny stocks," so I was unaware of the ad in IBD (to which I subscribe). In any case, I read IBD selectively, flipping through its editorial pages. omooc
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  •  
    Jun 12 01:09 PM
    I've always felt that IBD was a great publication. The research that they do is really amazing. Given how much money they spend protecting their credibility, I find it shocking that they would allow this penny stock ad to run, without at least doing some due diligence on the company. When publishing an ad in your publication can move the stock price, editors need to think about the ethical implications behind that. Even more importantly, they need to research the company and make sure it's a quality company. IBD should be ashamed of themselves. Still no public apology from them. They have lost a lot of credibility in my mind.
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  •  
    Jun 12 07:16 PM
    You have to wonder about the desperation for ad dollars or maybe ad dollars are so much greater than the potential for lost subscribers and/or credibility. Case in point - why does IBD run full length ads for competing services like gorillatrades and vector vest. Never understood that. The GZGT promotion is even more bewildering. It would be nice to hear a statement from at least one of these publications!
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  •  
    Jul 17 04:05 PM
    As an investor of pink sheets, i would like to defend myself as well as give some credit to the author. I applaud your detective work on the growth stock guru...before investing in any stock, especially a penny stock, you must research your sources and companies thoroughly...But there are some pink sheet stocks that are worth buying, and I only know this because i researched my source and now have a long-time trust relationship...

    -Cheers!
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  •  
    Sep 25 06:26 PM
    WAS GOING TO USE THE LAST OF MY "INVESTMENT FUNDS" ON THIS STOCK AFTER READING, DOWNLOADING THIS PARTICULAR AD...I GOT "LOST" READING OTHER ITEMS AND NEVER ACTUALLY MADE THE TRADE...WAS LOOKING FOR A CHINA INVESTMENT..AND SUDDENDLY SAW THESE DISCLAIMERS...THINK I'LL SIT ON THIS IDEA NOW...SEEMED LIKELY TO BE A GREAT STOCK TO GET STARTED WITH...THE "AD" ORIGINIATOR GETS AN A++++ FOR CONTENTS AND A BIG FU FOR RIPPING ME OFF AND WASTING MY TIME!!!!!!!!
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