If you’re familiar with my short-biased PennyStocking trading strategy, or watched the latest episode of LiveStock (in which I detailed this setup), it’s not hard to tell why I shorted 1,000 shares of PokerTek, Inc. (PTEK) at $4.69 right before the market close on Friday.
Not only was Friday its first down day after 5 straight—agonizing for early shorts, opportunistic for later shorts—up-days, after a blatantly-obvious-typically-bankruptcy-coming-type 50% mid-month drop in May, if on Monday we get a morning panic (which seems likely considering Friday’s price action with hugely fading volume due to the gradual realization by bitter long-term shareholders realizing they’d better take this bounce as an opportunity to the hell out and aggressive shorts to get in) that takes out Friday support of $4.50ish making $4 a likely downside target, which if the sellers can take out the probable stop losses there brings up $3.80ish, if you take a look at the reasons for the runup, you’ll see it’s no different than f#@%ed-company-last-chance-at-raising-capital-through-hype-type plays like IPIX, CAFÉ, VION and eerily-similar VRML of the past, all of which had been great piece-of-3-day-old-smelling-dung-type stocks to short into these message-board-rumor-floated-fueled-type plays.
That’s right, this runup has been orchestrated by either the desperate company themselves or desperate company shareholders, carefully constructed to manipulate the stock price higher to fake public interest to some naïve “institutional investor” who’s only as talented as any inbred-and-coke-loving-second-generation-“fundmanager”-more-interested-in-the-perks-associated -with-financing-a-sketchy-wannabe-gambling-company could be. A less cynical, more classically taught S@#$ing Alpha contributor naively believed the runup due purely to some positive talk at the Goldman Sachs-classy-peddlers-conference —forgetting the key lesson that management talking anything up means exactly squat, example: optimistic lying-through-his-scummy-teeth Bear Stearns CEO on CNBC days before total failure—at least getting his conclusion right by announcing “The momentum appears to steep, the trigger to flimsy to validate even a short-term hold.”
But any PennyStocking DVD student would instead focus on the Gizmodo article that featured PTEK’s product, the very day of the start of the runup and later message board chatter trying to get everyone excited that their product would be featured on the World Series of Poker.
And the hiccup that the company, despite their revenue increases, is constantly bleeding cash, ignored by banks so forced to be taking out loans from sure-to-be-begrudging-execs and will soon be forced to raise actual capital—that is if they can find anyone gullible enough to get excited by $100,000 contracts or to believe this manipulated stock price rise—ignoring comments like “A casino I go to in Vegas tried putting in some blackjack tables like this with screens and no real cards or chips. They sat empty until the casino removed them. When most people want to gamble, they want to play with cards and chips. These things failed miserably”, the recent resignations of execs and that at their current pace, their product ain’t nothing new or revolutionary so they’re out of cash in a few months.
Tags: Breakdowns, Capita Raising, Financing Deals, Patterns To Short, Short Selling
