By Tom Winnifrith | Thursday 5 January 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Yesterday I tried to explain the psychology of AIM fraud and fraudsters with reference to both African Potash (AFPO) and Cloudtag (CTAG). The great bear raider Waseem Shakoor also published a note explaining the seven steps of Cloudtag hype to facilitate is main business of share issuance. As you'd expect it is a cracking read. Over to the great Waseem
Since the L1 funding deal was announced at 14p, the following events have been used to create hope for the shares.
1. The podcast, where Amit Ben-Haim dismissed concerns over the nature of the funding, claiming it had been misunderstood. At the time, he also suggested that the reason for not disclosing the name of the financier was due to market regulations. Crucially, he claimed that everything was still happening "this year" and implied that the shares were a buy at 11p. All would be revealed in the Circular, he promised.
2. There was a campaign, largely run on LSE and Twitter, to make sure that holders didn't sell until news was released in the Circular. As it turned out, there was no material news.
3. After the disappointment many investors had on receiving no material news in the Circular, the shares began to drift badly as L1 were selling shares in earnest. At this point Amit Ben-Haim sent a private email to one of the key market abusers which was then disclosed to all & sundry on LSE and Twitter. It was a heavily cryptic email, offered nothing of substance, but it did suggest that there would be news akin to an "Advent calendar" of surprises in the lead up to Christmas. The excitement generated by this caused the shares to rally and created further volume for L1 to sell into.
4. At this point, a countdown clock was introduced on CTAG's website, again causing much excitement amongst the retail shareholder base as it suggested something big was to be unveiled. Meanwhile, more shares were sold by L1 to gullible buyers.
5. The selling by L1 was briefly interrupted for a week as CTAG shares were suspended as the company had been caught (once again) misleading its investors, and withholding market sensitive information, which would have been negative for the share price if revealed earlier. They managed to issue a "clarification" RNS just before the brand re-launch so that the shares were trading when the countdown clock hit zero.
6. Once again there was major disappointment when it was shown that the countdown clock offered more hype than substance. The "new" product looked very much like the old product, and there appeared to be nothing to excite investors or justify the song and dance.
7. We have now moved on to CES17, where apparently everything will revealed in all its glory. The product will be able to be studied in great detail, and will demonstrate a physical product that investors will be able to see first hand, rather than through mere photographs. This is the point at which the product will be able to demonstrate its worth against the saturated market that it will compete in.
Completely coincidentally, L1 have provided a gross £4.05m in funding to CTAG during this period. They have largely been buying shares at 6.5p from the company, and selling them at prices up to 17p to retail shareholders. I remain fascinated to see what "news" there will be for them to dump the rest of their shares, and the warrants that they have been granted for providing the death spiral finance.
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