The SmallCap Pump & Dump Capital Raising Game: AgFeed Industries Inc. (FEED)
What’s the ultimate goal of publicly-traded smallcap companies? They sell shares when their stock prices surge to raise the most capital possible. This morning, recent high-flyer Chinese pig-farmer (FEED) did just that, becoming the latest victor in the smallcap pump and dump capital raising game, raising a cool $10 million, selling shares at $16, less than 10% below their closing price of $17.40. What are they gonna do with this newfound capital—buy more pig farms of course!
You can look at this two ways—it’s great for the company that they could raise so much $ at such high prices—usually these financing deals are done at much bigger discounts, think 25%+. The capital gives them a shot at true business glory, even if the odds are still decidedly against them. Then again, it’s dilution below market prices—the rich get special deals—so this stock should open lower as poor people sell their shares—wondering how to buy stock 10% below market prices (hint: you either need to give the company a lot of $ or convince them you and your connections can and will pump up their stock price)
Don’t get me wrong, agri stocks are hot and this is a clear chart breakout so I have only two concerns: 1.) When companies do deals at inflated prices, you gotta wonder if the pump was natural or simply created by the company itself or “an unidentified third party” to show the investors they’re negotiating with how hot a company they are and to get the more $ on any deal. If so, promotions like that can cost a few hundred grand and a couple of puffy press releases–who knows, but the stock’s got a lot of proving to do. 2.) FEED proudly talks about buying these pig farms for only 3x net income—either they’re getting great deals or the pig farmers know their business better than naïve investors and are happy to be out of the pig-f%$@ing industry! If so, FEED should be trading with a PE of around 3—let’s give them the benefit of the doubt that their Blockbuster Video-type acquisition model will increase profits, earning them a PE of 5, putting the stock at $6/share.
But that’s rational sissy value investor thinking—this is a smallcap momentum play and whoever bought those shares is gonna try damn hard to pump this thing up so they can sell for some fat juicy pig-roasted profits!
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- Hot Stocks: A Bunch Of Mediocre Wannabes aka Stocks Not Gone Wild | Timothy Sykes - Stock Trader, Author, Entrepreneur
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- Pirates Pretending To Be Pig Farmers (Seriously) | Timothy Sykes - Stock Trader, Author, Entrepreneur
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1Tony Ellis(TIMBUCKS: $24)
April 17th, 2008 at 9:04 am
DAR looks like it’s breaking out
2timsykes
April 17th, 2008 at 9:37 am
out of visn at $14.16, not risking it given its pathetic volume, lac of follow-through and the fact that i’m flying later today… $125 loss, i’ll take those til i’m blue in the face cuz the risk-reward is still favorable
3BenBien
April 17th, 2008 at 9:42 am
I can’t believe you’re up this early talking about pig-farmers; if that ain’t passion I don’t know what is!
4Tony Ellis(TIMBUCKS: $24)
April 17th, 2008 at 9:45 am
DAR huge volume breakout
5Dan-O
April 17th, 2008 at 9:49 am
Anyone see the price vs volume divergence on EXIDE, check the 5 minute view? It’s textbook.
The body is always cold by the time I get there, I should change my handle to “The Undertaker”
6Dan-O
April 17th, 2008 at 9:52 am
XIDE, excuse me… I’m a mo-ron.
7timsykes
April 17th, 2008 at 9:57 am
after dropping to $13.7 on low volume, VISN now back to $14.60, gotta love morning shake outs
8Joseph
April 17th, 2008 at 9:58 am
See that’s what I was asking you about last week.
9cacaosteve(TIMBUCKS: $14)
April 17th, 2008 at 10:00 am
How far above 15 should I expect VISN to go, if it breaks out?
10Vijai - moneyreallymatters.com
April 17th, 2008 at 10:05 am
TImmy, as I was telling yesterday BZH is going down slowly today. VISN has very low volume which I don’tlike.
11Mike
April 17th, 2008 at 10:12 am
Tim, where you headed today? Judging by prior comments, it seems like your Buffalo trip went well! Any plans to come down to Raleigh/Durham, NC in the near future?
12InvestorsLive(TIMBUCKS: $40)
April 17th, 2008 at 10:23 am
damn VISN!
13Michael
April 17th, 2008 at 10:24 am
VISN broke out, how far it wil lgo?
14lmsmith
April 17th, 2008 at 10:26 am
Visn- above $15 now
15Dan-O
April 17th, 2008 at 10:53 am
EMKR just got pumped on CNBC
16Jonathan
April 17th, 2008 at 10:57 am
Tim,
DePaul University hasn’t forgotten about you! We’re drafting up our proposal e-mail which will be sent to you shortly. We need your “demands” on paper that way we can present it to our activities board.
17Dan-O
April 17th, 2008 at 11:02 am
I’d like to read that rider….one hundred green M&M’s ….no one may look Mr. Sykes in the eye…
18timsykes
April 17th, 2008 at 11:11 am
I don’t give a damn if BZH went to 0, i’d never touch it cuz its a real stock/macro play
VISN, very nice, do i regret selling, not at all, i play it safer than most…no idea how far it’ll go, i just aim to predict 50 cents-$2/share
ill speak wherever basically u just gotta pay for my travel expenses and my speaking fee, which is now $1,000…since it screws up my trading/blogging
19Jonathan
April 17th, 2008 at 11:23 am
Rumor has it UMinnesota is getting you for $500…don’t high ball me Timmay!
20Rambone
April 17th, 2008 at 11:42 am
Tim is the man. Who has ever met a guy more honest. I remember on elite trader when you had tons of haters stalking you. Just another day in the life of the rich and the famous.
Dumped my POZN for break even. No 2nd day continuation. Gotta always play it safe my friend. I’d rather preserve capital and miss out on gains. This strategy will keep you in the game longer. Tim is teaching you the right way to play. All about the odds.
21monkiman(TIMBUCKS: $33)
April 17th, 2008 at 11:52 am
FEED tanking right into the toilet, wished I never covered…
22Dan-O
April 17th, 2008 at 12:05 pm
Tim, is that the beginning of a H&S on VISN? I see a left shoulder, and head…. Ah, I’ll just wait for confirmation.
23Diesel Anderson
April 17th, 2008 at 10:34 pm
Nice pictures tim, how about a disclaimer so my boss doesn’t walk in when your blog is on my screen though?
Can’t believe I’m the first to comment on the pictures!
24timsykes
April 17th, 2008 at 10:37 pm
my name is the disclaimer