Did a Value Investor Unwittingly Promote a Penny Stock That Crashed?

[bathtime]

Jacob Wolinsky has posted to this board, linking to material at his site valuewalk.com. Useful material, such as hedge fund letters by Klarman, Loeb, etc. His bio there describes his value investing background.

 

On April 5, 2012 on Seeking Alpha, Wolinksy published a paid promotional article on Sunpeaks Ventures (SNPK) titled "Aggressive Growth Plan Sets Sunpeaks Ventures Up For Bright Future":

 

http://seekingalpha.com/article/481511-aggressive-growth-plan-sets-sunpeaks-ventures-up-for-bright-future

 

A record of news releases shows a massive penny stock promotion began on April 5 by penny stock websites:

 

http://www.otcmarkets.com/stock/SNPK/news

 

On April 18, eight trading days later, SNPK topped at $2.40 (near a billion in market cap), having a achieved a 500% return since its stock market debut, five weeks prior. Later that day, on no news, SNPK dropped nearly 75%. On July 2 the stock closed at $0.04 - a 98% loss in ten weeks for anyone unfortunate enough to have bought at the peak.

 

http://stockcharts.com/h-sc/ui?s=SNPK&p=D&yr=0&mn=6&dy=0&id=p54457278803

 

Wolinsky prefaced his article, "I have received compensation to research Sunpeaks Ventures (SNPK.OB). Nevertheless, I have tried to write to the best of my ability an unbiased review of this company."

 

His analysis included the following:

 

"Players in the vitamin and OTC drugs industry include such giants as Herbalife (HLF) and Perrigo (PRGO), both sporting market caps of over $8 billion. So the potential for Sunpeaks is there. To get an idea of the upside that awaits Sunpeaks one has to look back a few years. Just in the past three years, Herbalife has risen from a split adjusted just over $8 a share to nearly $70 now. A similar jump in Sunpeaks would take the stock to $8 a share."

 

Wolinsky commented on his article on April 15, "I was very transparent in my disclosure and SA allows sponsored posts. I did my best job to prevent [sic] the long side. I am not recommending anything."

 

That was the last occasion on which he mentioned SNPK.

[Parsad]

Jacob seems young, and his site has been getting gangbuster viewership, so with that comes offers from those seeking attention and I think he may have been suckered.  I would suggest he tells whoever paid him for the coverage to go f**k himself next time. 

 

Also, do more research and find out who you are dealing with.  A quick review of some of the people involved, their previous company registrations, and just reading the financials would have indicated that the story is probably too good to be true. 

 

1st Q 2012 Report:

 

http://www.sec.gov/Archives/edgar/data/1470915/000107878212001595/f10q033112_10q.htm

 

Really not much in assets and a few hundred thousand in revenue.  Market cap is at $15M right now at four cents and was in the hundreds of millions recently...looks like a typical promotion. 

 

Article from 2008 on the Barch family and Clotamin:

 

http://ww2.gazette.net/stories/070208/bethnew213017_32358.shtml

 

David Baines, who is an award-winning investigative business journalist in Vancouver, has been covering Sunpeaks, including the Barch family, and it isn't good.

 

http://www.vancouversun.com/business/Sunpeaks+Ventures+went+public+with+cheap+shares+offshore+accounts/6459821/story.html

 

http://www.vancouversun.com/health/Baines+America+hottest+penny+stock+links+controversial+Osoyoos+family/6444357/story.html

 

Cheers!

 

[Josh4580]

looks pretty shady to me.  Not worth it to ruin your reputation for a few thousand dollars.  Anyone agree?

[benhacker]

For any other young bucks out there trying to make a name for themselves (I'm not too old myself...),  I'd encourage you to remember that nothing goes away on the Internet... when you say some really dumb shit, it's out there forever (I know, I've said some not-so-smart stuff...).  When you associate with frauds fakes and liars, it's forever burned into your online resume.

 

In one article Jacob most likely lost (permanently) the respect of the exact audience that he was seeking to impress (at least on my reading of his prior notes about Klarman, etc).  I don't know him, but reading that fluffy POS article on an obvious scam is enough for me to remember his name in a negative light for a long time.

 

The world is too small to do stuff like this for a few bucks.  It's too small to do this for a lot more than a few.

 

Ben

[Hielko]

Imo: you can remove the unwittingly from the thread title. This was such an obvious scam, and if you run a website with paid premium content you have no excuse for not figuring this out.

[alwaysinvert]

I had his site in my rss reader for a long time. Used to be a decent one for value investing news. I erased it a while ago as it had become way, way too spammy and promotional. Seems like yet another guy who has found a way to make money off the investment community without actually investing.

[berkshiremystery]

For any other young bucks out there trying to make a name for themselves (I'm not too old myself...),  I'd encourage you to remember that nothing goes away on the Internet... when you say some really dumb shit, it's out there forever (I know, I've said some not-so-smart stuff...).  When you associate with frauds fakes and liars, it's forever burned into your online resume.

 

In one article Jacob most likely lost (permanently) the respect of the exact audience that he was seeking to impress (at least on my reading of his prior notes about Klarman, etc).  I don't know him, but reading that fluffy POS article on an obvious scam is enough for me to remember his name in a negative light for a long time.

 

The world is too small to do stuff like this for a few bucks.  It's too small to do this for a lot more than a few.

 

Ben

 

Ben,...

unfortunately these are true words what you are saying.

I'm myself see everything what might come now from him with some doubt.

 

Just some wise quote from Buffett:

It takes 20 years to build a reputation and five minutes to ruin it.

 

 

[tombgrt]

I had his site in my rss reader for a long time. Used to be a decent one for value investing news. I erased it a while ago as it had become way, way too spammy and promotional. Seems like yet another guy who has found a way to make money off the investment community without actually investing.

 

I feel the same way alwaysinvert.

 

The article offers plenty of noise and meaningless generalities on the sector while offering little useful insight in the company itself. I'd say that's fairly typical in these kind of pump and dump stories.

 

To get an idea of the upside that awaits Sunpeaks one has to look back a few years. Just in the past three years, Herbalife has risen from a split adjusted just over $8 a share to nearly $70 now. A similar jump in Sunpeaks would take the stock to $8 a share. A smaller player in the industry includes Usana Health Sciences (USNA), which has been in business for a not too shabby 20 years.

 

Ver hard to call this research "preventing to take the long side" with a straight face. And unbiased? Forget it! I hope he gained the insight that this is ethically wrong. The responsability lies with him.

 

 

 

[nkp007]

I feel sad. Maybe he regrets this.

 

Also, I wonder how much they paid him. In shares?

[premfan]

My consultant told me to try and view the world in shades of grey instead of black and white. So lets a crack at this. Judging moral code is a subjective matter it depends  on the environment the person is in. Given enough adverse situations people rationalize any behavior. Survival trumps moral code. We dont know what situation this guy was in. At least he was honest in that he received compensation. No different than people in forums preaching there ideas. The more people replying to there post the more people feel good about there idea. Comfort in the herd. They rationalize there idea is better than it is  by the number of people agreeing with them. There are exceptions but the more replies and post on a idea the more it loses interest to me. Hearing things like " I have confidence in management" something so intangible that it blinds the person from the current reality. People rationalize anything they want. I accept this

[Liberty]

Hearing things like " I have confidence in management" something so intangible that it blinds the person from the current reality.

 

I think this is a crack at something I wrote recently, which is strange when you consider that people like Buffett, Munger, Watsa, etc.. Constantly talk about how important management is and how their confidence in the management of many of their investments is one of the most important elements to their analysis.

 

Personally, if I don't feel confident in management's abilities after a lot of due diligence, I won't invest even if the "tangible" numbers look good. To each their own I guess..

[Mephistopheles]

I had his site in my rss reader for a long time. Used to be a decent one for value investing news. I erased it a while ago as it had become way, way too spammy and promotional. Seems like yet another guy who has found a way to make money off the investment community without actually investing.

 

+1

 

I started to see way too many articles about Facebook. And not even about the stock, just articles about the website. It was strange.

[oddballstocks]

I had his site in my rss reader for a long time. Used to be a decent one for value investing news. I erased it a while ago as it had become way, way too spammy and promotional. Seems like yet another guy who has found a way to make money off the investment community without actually investing.

 

+1

 

I started to see way too many articles about Facebook. And not even about the stock, just articles about the website. It was strange.

 

I think he's trying to become more of a news site than a value investing site.  It seems there is a lot of news about hedge funds and Apple products.  I don't fault the guy for trying to make a buck, value investing is a niche product whereas general news an finance have a broader audience.  If this is his livelihood then targeting a bigger population makes sense.

[alwaysinvert]

I had his site in my rss reader for a long time. Used to be a decent one for value investing news. I erased it a while ago as it had become way, way too spammy and promotional. Seems like yet another guy who has found a way to make money off the investment community without actually investing.

 

+1

 

I started to see way too many articles about Facebook. And not even about the stock, just articles about the website. It was strange.

 

I think he's trying to become more of a news site than a value investing site.  It seems there is a lot of news about hedge funds and Apple products.  I don't fault the guy for trying to make a buck, value investing is a niche product whereas general news an finance have a broader audience.  If this is his livelihood then targeting a bigger population makes sense.

I don't fault him for that either, but I won't consume that product.

[premfan]

Hi Liberty,

 

No knock on you i have no vested interest in that company so i wish you get success and riches.

[premfan]

great*

[Liberty]

Hi Liberty,

 

No knock on you i have no vested interest in that company so i wish you get success and riches.

 

Sorry if I sounded defensive, but I had just written "I'm confident in management" in another thread and I saw it here, so I wasn't sure if it was directed at me. Cheers.

[Kraven]

I haven't looked at his site in a long time for many of the reasons stated here and didn't see the article this thread refers to.  That being said, give the kid a break.  He's trying to make a buck.  He disclosed what he was doing and while disclosure doesn't cleanse all sins, it certainly can cleanse an issue about motive.  His motive was to make money, he was clear on that (it would seem from what people are saying).  You don't like it, fine, don't go to his site.  The hypocrisy on the board though is fairly thick.  I guess when "Prem" or "Warren" talks their book, that is just good business.  When a kid with a family is trying to make a buck and being upfront about it does it, it's wrong.  Don't go to his site ever again if it offends your delicate sensibilites.  But don't condemn him.  Give me a f**king break.

[Hielko]

You might want to make a distinction between talking your own book or recommending a scam, it's not the same. Just becaues he is honest about his motive doesn't make it ok.

[Kraven]

You might want to make a distinction between talking your own book or recommending a scam, it's not the same. Just becaues he is honest about his motive doesn't make it ok.

 

I have no dog in the fight and couldn't give a crap about it other than the fact that I hate hypocrisy.  I don't know the stock, I don't know the article he wrote.  Is it a proven scam?  This is a fact?  Maybe it is, I don't know.  I guess, sure, if it's a scam then he shouldn't have written it.  But I would ask too, why is some random guy coming to a different message board to start a thread condemning some guy somewhere else?  That strikes me as odd.  And the the subject line about a "Value Investor" implies that Jacob Wolinsky is some superstar in the investing world instead of a young guy trying to support his family.  The whole thing is very weird. 

[tombgrt]

It's not about the site but about his decision to promote a company that is close to a scam. No one here is saying he did something criminal, just unethical. At least that is the perspective of some here.

 

This also has nothing to do with hypocrisy as the ultimate effect of Prem and Warren talking their book is very different than what is achieved here. They aren't deliberately hanging up a big bs story that misleads others. I think it's fair to say that it wasn't "unbiased" or"focused on "preventing the long side", he's just trying to save face. I still think he's a bright guy with a great entrepreneurial spirit and it would be a waste if he continued doing this stuff, which is far below his capabilities. This was a misstep imo but I wish him the best of luck.

[tombgrt]

You might want to make a distinction between talking your own book or recommending a scam, it's not the same. Just becaues he is honest about his motive doesn't make it ok.

 

I have no dog in the fight and couldn't give a crap about it other than the fact that I hate hypocrisy.  I don't know the stock, I don't know the article he wrote.  Is it a proven scam?  This is a fact?  Maybe it is, I don't know.  I guess, sure, if it's a scam then he shouldn't have written it.  But I would ask too, why is some random guy coming to a different message board to start a thread condemning some guy somewhere else?  That strikes me as odd.  And the the subject line about a "Value Investor" implies that Jacob Wolinsky is some superstar in the investing world instead of a young guy trying to support his family.  The whole thing is very weird. 

 

On the other hand... You are making it sound as if he had no choice. "If you "need" to support your family (that you may or may not have) it is "oke" to post bullshit misleading others to make a quick buck."

 

"Value investor" implies nothing in my mind, but English is my third language so that could be it. But it adds to the gravity of the issue as he has some public profile in the value investing community online. The source (TS) is irrelevant to the facts lol?

 

Jup, not a proven scam but even if it isn't, I think we can agree that is was misleading (imo, even if "promotional") and obviously under his true skills as an investor. This last observation isn't proven either but come on... Look at what he wrote and what he generally knows and writes on the subject of value investing.

[Hielko]

You might want to make a distinction between talking your own book or recommending a scam, it's not the same. Just becaues he is honest about his motive doesn't make it ok.

 

I have no dog in the fight and couldn't give a crap about it other than the fact that I hate hypocrisy.  I don't know the stock, I don't know the article he wrote.  Is it a proven scam?  This is a fact?  Maybe it is, I don't know.  I guess, sure, if it's a scam then he shouldn't have written it.  But I would ask too, why is some random guy coming to a different message board to start a thread condemning some guy somewhere else?  That strikes me as odd.  And the the subject line about a "Value Investor" implies that Jacob Wolinsky is some superstar in the investing world instead of a young guy trying to support his family.  The whole thing is very weird.

I do know the stock, and yes; it's 99.99% a scam (actually looked if shorting was possible, but obv. no borrow available, because it was way to obvious a short). And it's not just some guy, it's someone that posts on this board; also giving a logical reason why it's posted here. It's not just a random post about some random guy that happend to write something about some random company.

[Kraven]

LOL.  Off with the kid's head then.  Let's take him to the gallows pole.  Yes, he is a guy who posts here.  Lots of people do.  These aren't hallowed grounds we are talking about.  Whatever.  So he made a mistake.  I doubt he was forced to post it or his family would starve, but obviously he wanted the money.  At the end of the day, he disclosed what it was he was doing and people are required to do their own due dilly anyway.  It just doesn't bother me.  The uproar about it though is quite humorous.

[tombgrt]

LOL.  Off with the kid's head then.  Let's take him to the gallows pole.  Yes, he is a guy who posts here.  Lots of people do.  These aren't hallowed grounds we are talking about.  Whatever.  So he made a mistake.  I doubt he was forced to post it or his family would starve, but obviously he wanted the money.  At the end of the day, he disclosed what it was he was doing and people are required to do their own due dilly anyway.  It just doesn't bother me.  The uproar about it though is quite humorous.

 

Again, some of us are only saying that we think it is unethical and that we regret his decision to head this way, young guy with a family or not. If you don't care for opinions on a public forum, you can always leave. No one forces you to read this thread.

 

 

Maybe I'm sounding harsher than I think, idk. Off to the gym to lose some stress!  ;)