Even still, O’Connell may have gotten some bloggers to take the bait.
Over on SeekingAlpha, another open blog platform, four positive posts were written during the stock’s rapid ascent — and those four were syndicated to major financial portals like Yahoo! Inc. (NASDAQ:YHOO) Finance.
How to launder a bullish call
In addition to wider distribution for their pump, the promoters got the invaluable stamp of legitimacy. Consider this sleight of hand: On April 4, a blog post published on SeekingAlpha stated: “Boutique research firm Murphy Analytics covers the stock with a price target of $4 a share.” (That link, from the original article, doesn’t work; you can see the report here.)
On April 5, PreferredPennyStocks.com, one of the sites aggressively touting Goff, sent an email to its email subscribers that said, in part: “As put by an analyst from SeekingAlpha: ‘Boutique research firm Murphy Analytics covers the stock a [sic] price target of $4.00 a share.’ At this rate there is every reason to believe that these guys are right on point!”
The “boutique research firm” in question here was paid $5,500 for initiating coverage on Goff, too — although the disclosures in the analyst’s report state that “no part of the compensation to [Murphy Analytics] is tied to any content contained in this report or any view expressed in this report.”
Murphy Analytics’ Patrick Murphy told me that the Goff report was funded by a third party, but that “even if a third party pays for the report, the reader should assume the covered company is funding the report directly or indirectly,” because in all likelihood the funding is coming from “the company’s investor relations firm or an affiliate operating with a budget funded by the company.”
As a CFA charterholder, Murphy abides by high levels of professional ethics, and he stipulates in his disclosures that being paid by a company doesn’t influence his work. Yet, the sequencing is a disaster for retail investors:
- Someone — Goff itself or a third-party promoter — pays Murphy Analytics to initiate research on Goff.
- A SeekingAlpha blogger cites the Murphy Analytics research (specifically, the $4.00 one-year price target).
- Third-party promoters, in this case PreferredPennyStocks.com, quote from the widely distributed article written by a SeekingAlpha blogger.
- The stock takes off.
- In a little while, probably after a bunch of naive investors or traders have bought, the stock falls back to earth.
Have a look at Goff’s stock chart:
Source: Google Finance.
The since-deleted Fool blog posts and the four bullish Goff articles on SeekingAlpha were published between March 20 and April 9, right as the stock began its devastating slide. Goff reached an all-time high of $0.65 intraday on April 8. It’s now at $0.02.
I emailed the SeekingAlpha bloggers who wrote glowingly of Goff. Two did not respond to my questions; two denied any contact with Goff or its representatives and said they discovered the company via screens or friends.
When I reached out to the email address provided on Goff’s website, the email was immediately returned as “undeliverable.” Queries made through the company’s “contact” form on its website were not returned, but soon, the company may have to answer for itself.
This week, Goff and its third-party promoters were sued in a California court for engaging “in a scheme to disseminate spam emails in order to artificially create a marketplace for the stocks of worthless companies at artificially high prices.”
