Serious Speculators have learned over the years that too much hype signals trouble in a microcap stock. The recent rise and fall of Connect-A-Jet OTC CAJT, is a classic example. Needless to say, the only people who lost money on this stock are the ones failed to heed the warning signs. For us, there was one particular moment, the company’s press release on September 6th when they announced “it has submitted a Letter of Intent to engage into a charter partnership with Executive Jet Management, a NetJets and Berkshire Hathaway Company.” that signaled more than any other event that one needed to proceed with great caution.
We noted with interest that sending the Letter of Intent announced in the press release did not require the invitation or permission, or even the knowledge of Executive Jet Management. They could just as easily have sent an uninvited proposal, in the form of a “letter of intent”, to Expedia, Inc (NASDAQ EXPE) to be acquired for $10 a share then issued an announcement “Connect-A-Jet submits Letter of Intent to be acquired by Expedia, Inc for $10 a share”. Were it not for the fact that such a release would certainly have triggered an immediate investigation by the SEC, they would probably become commonplace if one was issued and got the desired spike in price.
In the world of creative announcements, our favorite idea has always been this headline “Corrupt Computers enters into exclusive licensing agreement with Mircosoft, Inc. to Establish International E-Commerce Network.” Of course, all the folks at Corrupt Computers did was to purchase and install Windows XP on their computer, which required them to sign the licensing agreement that comes with the software. Still, the announcement would be accurate if not misleading.
Companies need to promote themselves, especially the little ones without the support of the brokerage community. We love the entrepreneurial spirit that flourishes in the bulletin boards. It’s the only way to get the story out and many of the stories are really good ones. Serious Speculators learn to recognize the difference between creative yet aggressive promotion and pure BS masked as news.
In time, we will find out exactly which CAJT PR’s were hyperbole and which were just lies but Serious Speculators learn from history so as to avoid pitfalls in the future.
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