The first article attacking Atlantic Wind & Solar Inc. (OTCPK:AWSL) which came out the day after the company's shares not only hit a record high of $4.84 per share but, the same day also recorded the single largest short sales of the stock. Actually representing more then 60% of all the shares traded. Meaning more then half of the shares sold were 'phantom shares'.
While short sales are legal if you first borrow the underlying shares before entering the sale, thus ensuring the true balance of supply and demand remains in tact. Meaning you can't sell more shares then actually exists. The share borrower, if they do it legally, would also pay a small fee to the lender of the shares.
This in contrast was a 'naked short'. This is not legal. In fact what they are doing is selling shares that do not exist, taking money from some legitimate investor and not delivering any shares to the investor. Selling 'phantom shares'.
Not only is this illegal but is very risky financially if you cannot buy the shares back or borrow them in time. As they can be forced to repurchase them at even higher prices. They are required to deliver the shares within 3 days. As reported by FINRA (Financial Industry National Regulation Association) the 'phantom shares were undeliverable for months. Meaning day after day they continued to sell shares they did not own dumping more 'phantom' shares in the market and thus destroying the true balance of supply and demand. According to the reported by Buyins.net there was more the 2,100,000 of these shares sold.
While these short sellers were continuing their illegal practice a very dramatic change was about to appear in the public perception of Atlantic Wind & Solar and its management including Chairman, Gilles Trahan. Up until this point they were the darlings of the internet chat rooms and forums and seemingly every news letter writer were talking favorably about them and their future.
The Dramatic Change
The night before the first article by Davis of TheStreetSweeper, in a wave unlike anything I have ever seen before, a mass mobbing of all internet forums most notably investorshub.com (iHub) and Yahoo Finance were swarmed with new posters all attacking the management and the company.
Every deal was attacked stating they were fictional. The; what I would call; negative bashers would say they have contacted the companies mentioned in all the press releases and that they were told they have never heard of Atlantic. Every single positive post was overwhelmingly attacked as a scam. Posters would post contact information and links to the S.E.C. and F.B.I. to report this fraud. People who posted anything positive would be attacked as being a co-conspirator and that they too would be reported.
The following morning the infamous StreetSweeper article came out. The message boards grew even more active and the stock took a nose-dive. I have to admit I was pulled into this and I too was happy I did not invest in this, as there seemed to really be something to this StreetSweeper story. However shortly after I was alerted to an article on a new form of market manipulation that until this time I did not know existed. The term was "short and distort". Simply I was in total shock of what I read and began investigated this further..
Short & Distort
In the first article I read on the subject, was on Investopedia. In it the following section jumped out giving me a very sinking feeling in my stomach as it was way too familiar:
"The S&D (short & distort) shysters try to profit by stimulating fear, but this only works if they have credibility. As such, when working online they will often use screen names and email addresses that imply that they are associated with the SEC or the Financial Industry Regulatory Authority (FINRA) (formerly the National Association of Securities Dealers), or that they can regularly spot worthless stocks. Their goal is to convince investors that every proponent of the stock has ties to the company and that the SEC is watching and will halt the stock. S&Ds also intimate that they are looking out for investors' interests.
S&D players clutter message boards, so optimistic information cannot easily be found. "Get out before it all comes crashing down" and "Investors who wish to enter a class action lawsuit can contact…" are typical posts, as are their projections of $0 stock prices and 100% losses. If their strategy is suspected by "longs", they attack the person who has caught them. In other words, the market manipulator will do everything in his or her power to keep buyers out of the stock and keep the price heading south." ... to read the full article."
Incredibly, not only was this vaguely familiar but this sounded like the handbook that was used against this very company. While these tactic still continue to this day, although we have not seen any articles from the Streetsweeper.org since early 2010 the same negative warnings that the stock is going to be halted by the S.E.C., stand up for your rights and sue these scumbag thieves and statements continue to be posted by the same members sometimes as much as 20 times a day by the same person. I also noticed that all messages on investorshub.com that challenged the bashers and offer rebuttals seemed to be deleted within minutes yet one single basher has made over 10,000 posts. As a test, I placed a message on the forum highlighting some positive news and challenging some of the naysayers. Within minutes I received private messages from a couple of the bashes threatening to disclose me and ask me about the sexual acts I performed with the company's CEO. Clearly I was mot welcome. Upon reporting it to the site administration they told me to simply click ignore.
Although the stock continues to trade and no action has been taken by the S.E.C. or any other regulators. The fact is the manipulators have won, so far. There efforts have been rewarded. Scaring off any new buyers they have had tremendous success as the stock trades under $0.40 now. Although 2 stock dividends have been issued, so each shareholders has 50% more shares then when he started, this is of little consequence to the investors who bought 'phantom shares' from the short seller at over $4.00 a share.
The People Behind TheStreetSweeper.org and Now it Gets Interesting
In a January 9, 2012, Questcor Pharmaceuticals, Inc. (NASDAQ: QCOR) issued a press release responding to a StreetSweeper article written about them, and they had this to say about the article and website.
Questcor has been unable to determine the exact nature of StreetSweeper.org, its ownership structure, or its revenue sources. The website, www.thestreetsweeper.org, provides no information on these topics, and standard listings about it are limited and opaque. Based on our examination to date, we believe that the website lists people that it claims are associated with it, one of whom the website and media reports identify as a felon who pled guilty to two conspiracy charges - for securities fraud and money laundering - and who later pled guilty to racketeering charges related to stock manipulation, another of whom has the same name as an individual who, according to media reports, was arrested recently for kidnapping and extortion, and another of whom has the same name as an individual who, according to media reports, has been involved in extensive litigation regarding fraud, defamation, and slander. The exact nature of the relationships between these individuals and StreetSweeper.org is unclear. It is also unclear whether the website's purpose is journalistic or to further the economic interests of short sellers without regard to accuracy (a practice referred to as "short and distort"). Read the whole PR.
Calling a Spade a Spade
Redchip.com was a little ore direct with their headline entitled Melissa Davis of StreetSweeper: In Bed with Short Sellers and Convicted Felons. Read more
Another company striking back at the StreetSweeper is Gold Resources Corp. Read Press Release.
The Destruction of Small Business in America
How many people had to sell stock losing their savings because one or two individuals think it is ok to purposefully manipulate investors into selling so they can make money? How is this any less corrupt than the Enron management or any other securities violation or crime? In fact some might argue this is even more destructive to America as it is preying upon the small business and trying to force them to go under. By driving down the stock and spreading false rumors the Company is unlikely to raise more money to fuel their growth and with more and more people and companies turning to the internet for researching a company to do business with, this also can slow sales dramatically causing not only a reduction of employee hirings but usually mass layoffs.
Voice your concern and sign the online petition and get the SEC to look at this form of manipulation. Go to http://www.petitiononline.com/mrktrfrm/petition.html
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.