Post: #1

http://www.bloomberg.com/news/articles/2...-financing

Basically he looks for frequently traded penny stocks...offers them money in exchange for debt but the debt is convertible to equity...the equity being a discount on shares. Then when they don't pay he converts the debt into shares at a 40% discount from that day's trading price and unloads them. In one deal alone he made $17 million.

In terms of share valuation what hes doing is pretty sleazy and may be illegal but you have to admire the level of hustle.

Post: #2

Even a former finance professor I once had told me to "stay away from penny stocks".

Post: #3

I wouldn't touch penny stocks with a ten foot pole either.

Post: #4

Sounds pretty interesting I wonder how that sort of deal gets put together. Anyone have a handle on how it gets done?

Post: #5

(03-13-2015 12:02 AM)Tim in real life Wrote:  Even a former finance professor I once had told me to "stay away from penny stocks".

He's probably dead on, but unless he's bankrolling some serious cash in his "side business," a finance professor would not be my first choice for financial advice.

Beyond All Seas

"The individual has always had to struggle to keep from being overwhelmed by the tribe.
To be your own man is a hard business. If you try it, you'll be lonely often, and sometimes
frightened. But no price is too high to pay for the privilege of owning yourself." - Kipling

Post: #6

There's nothing anyone can do to take away this guy's success, but I'm looking kind of sideways at this.

This guy managed to get a six-figure loan from a family friend to get started.

There are a lot of people out here who have ideas, but they don't have access to capital like that to get some things going.

The fact that this guy is Jewish can't be ignored. Jewish people seem to look out for each other like that. I mean, hell, how many family friends who've done nothing in life and are living in their parents' basements, would you give a "low six-figure loan" to?

Keep in mind, we're talking about penny stocks, so he was gambling from the word "go", so either he had some sort of inside information to make this work so that he couldn't fail or something else is at play.

Again, you can't take away anything from anyone's success, but these success stories always leave out details that would put the entire situation in the right context.

Post: #7

He is not trading penny stocks but lending them money and then fucking them over legally or when they happen to turn around or liquidate.

It's actually a good idea, because the valuation of a company often does not reflect their real life assets, but more future projection of earnings (if even that).

But hey - it's fine doing that, albeit his business is similar to a 1980s corporate raider liquidating a company - his trick is to fuck the company over while giving them a loan. Good hustle - could be done in other countries as well, but you have to have some cash for it beforehand.

Post: #8

(03-13-2015 04:05 AM)Zelcorpion Wrote:  He is not trading penny stocks but lending them money and then fucking them over legally or when they happen to turn around or liquidate.

It's actually a good idea, because the valuation of a company often does not reflect their real life assets, but more future projection of earnings (if even that).

But hey - it's fine doing that, albeit his business is similar to a 1980s corporate raider liquidating a company - his trick is to fuck the company over while giving them a loan. Good hustle - could be done in other countries as well, but you have to have some cash for it beforehand.

You'd also need a good legal system to enforce the debt instruments. Having a legal basis to sue is one thing, attaching the assets, getting a judgment and reaching and applying the assets to it is another.

Post: #9

""Sason bought his penthouse in Tribeca for $4.2 million in January 2013. At some point he upgraded from the Mustang to a $200,000 two-door Mercedes-Benz, his high school buddy Antonelli says. He started hanging out at Lavo, a bottle-service club in midtown Manhattan popular with celebrities. “He’s there like Thursday, Friday, Saturday, Sunday,” says Antonelli, “holding court with all the beautiful waitresses.”
"

Either this guy IS G-Manifesto, or this is how the G-man makes his money....

Post: #10

Quote:On the surface, the $75,000 loan Magna offered seemed all right. It was in the form of an “8 percent convertible promissory note,” meaning it asked for an 8 percent return and gave Sason the right to convert it into stock. The fine print explained that if Pervasip didn’t pay back the money within six months, the lender could convert at a 45 percent discount to the market price. So, no matter where Pervasip’s stock was trading, the company had to give Magna shares that were worth more than $136,000—an 82 percent return in just six months. Essentially, Magna locked in a fixed return.

This guy is not an entrepreneur or a hustler who makes money through hard work, risk taking and providing value to others. He basically just found a fancy way to engage in usury by taking advantage of desperate companies. There's nothing admirable about this, it's pure financial parasitism. He contributes absolutely nothing to society. He's doing the financial equivalent of picking the pockets of dying men.

I have more respect for janitors and garbage men than I do for guys like this. At least the former make their money honestly and contribute value to society. The latter just siphon off wealth through various schemes like this. The fact that such parasites are continually lauded by the media and the general public is indicative of ours being a society that has lost both its common sense and its moral compass.

Post: #11

Scorpion, that's was initially my thoughts until I re-read the article to understand how Magnas penny stock deals work. Whether they are parasites or financial saviours depends on how well the due diligence is done and on whether investment choices are made ethically or not.

I just checked and Newleads shipping is still operating and has expanded its fleet. It's possible that with only 1 month of operating capital at the time that the Magna deal saved Newleads and set the stage for them to turn their business around.

Yes, the returns on investment for Magna are high, but then lending money to a struggling company in return for potentially worthless shares is a high risk strategy.

I would like to see how many of these companies were saved by the Magna deals. It seems to me the only losers in these types of deal are the rest of the company shareholders who see the value of their stocks plummet to almost nothing. On the other hand, if the company recovers and thrives again and starts paying a dividend, these stocks will recover in value in the long term and the remainder of the shareholders could more than recover their investment value. It seems to me that the key to not being a parasite in this business lies in the due diligence in looking at company viability and in a certain amount of ethical judgement.

Post: #12

Oh, and it seems Pervasip are still trading as well http://www.pervasip.com. So that's at least two companies saved by these penny stock deals.

Post: #13

Guitarman, read more carefully:

Quote:On the surface, the $75,000 loan Magna offered seemed all right. It was in the form of an “8 percent convertible promissory note,” meaning it asked for an 8 percent return and gave Sason the right to convert it into stock. The fine print explained that if Pervasip didn’t pay back the money within six months, the lender could convert at a 45 percent discount to the market price. So, no matter where Pervasip’s stock was trading, the company had to give Magna shares that were worth more than $136,000—an 82 percent return in just six months. Essentially, Magna locked in a fixed return.

There is no risk. These parasites will take their pound of flesh regardless of what happens to the company. That is what makes them parasites and not honest investors or speculators risking their capital for a potential future return.

Post: #14

(03-13-2015 07:45 AM)scorpion Wrote:  There is no risk. These parasites will take their pound of flesh regardless of what happens to the company. That is what makes them parasites and not honest investors or speculators risking their capital for a potential future return.

Basically a mob tactic used by banks all over the world but if I had the chance to loan with a guaranteed return and the company liked the deal, I'm throwing money at them.

Post: #15

"Guitarman, read more carefully:"

You have a good point, I concede that. After posting that occurred to me. However, still a high risk business to be lending money to these companies, what if the company has ceased trading and the stocks are worthless?? Magna cannot convert the stocks for six months. In that time the company could have gone under. This is where the due diligence comes in. He could count a handful of deals that went wrong, presumably the company went bust and the stock was worthless.

82% of nothing is nothing. So there is risk, a considerable risk if you go into this business without knowing what you are doing.

It makes sense that Magna is now more into investing. As the same skills needed to evaluate a struggling company would be useful in evaluating an investment.

"Magna has done deals with at least 80 companies. Of those, the stocks of 71 have gone down since the investment."

So at least 71 out the 80 are still in business. A company would only agree to take out a "pawn" loan for shares at guaranteed option profit if no one else would lend the money. Whether Magna are sharks or saviours depends on whether these 71 companies would have gone under without the loans??

Post: #16

(03-13-2015 02:54 AM)jariel Wrote:  There's nothing anyone can do to take away this guy's success, but I'm looking kind of sideways at this.

This guy managed to get a six-figure loan from a family friend to get started.

There are a lot of people out here who have ideas, but they don't have access to capital like that to get some things going.

The fact that this guy is Jewish can't be ignored. Jewish people seem to look out for each other like that. I mean, hell, how many family friends who've done nothing in life and are living in their parents' basements, would you give a "low six-figure loan" to?

Keep in mind, we're talking about penny stocks, so he was gambling from the word "go", so either he had some sort of inside information to make this work so that he couldn't fail or something else is at play.

Again, you can't take away anything from anyone's success, but these success stories always leave out details that would put the entire situation in the right context.

Well, as a Jewish guy who works in finance, I can tell you it kinda can be ignored.

The not-so-secret trick is that LOTS of people who work in finance get such help from their family, they just don't admit it. Yes, there are a lot of Jewish people in finance, but many who are not. I'd say certainly more WASPs.

And such help may not be a direct massive gift of cash, it is often massive referrals from family members and their friends. A guy I work with indirectly has basically a life debt to his father-in-law.

And no, my folks never gave me such a gift, nor would I ask. It's not our style. I'm older than many here (39) and my folks are just more old fashioned in that I've always been expected to make it on my own after college. To be clear, no hate towards anyone who has (and not to imply I was deprived during my youth) received such gifts/handouts. But acting like one hit triple when born on third base is indeed prevalent in my field.

That this guy doesn't reveal how he makes money is telling, and I think everyone's analysis is spot on.

Post: #17

(03-13-2015 09:01 AM)Guitarman Wrote:  It makes sense that Magna is now more into investing. As the same skills needed to evaluate a struggling company would be useful in evaluating an investment.

"Magna has done deals with at least 80 companies. Of those, the stocks of 71 have gone down since the investment."

So at least 71 out the 80 are still in business. A company would only agree to take out a "pawn" loan for shares at guaranteed option profit if no one else would lend the money. Whether Magna are sharks or saviours depends on whether these 71 companies would have gone under without the loans??

That's not investment really. I did not even read through the story to realize that it was a scam.

Two decent ways to do it is either to give someone a loan under a fixed rate of return and another way is to become an investor and partake in the profits.

It seems rather to me that he is an excellent salesman who took advantage of struggling companies more like a loan shark or a mobster. Whether 71% of those companies "still breathe" is irrelevant here, because that guy took hundreds of thousands or in some cases millions out of the assets of the company founders.

This is tantamount to a mobster saying that the success of the struggling restaurant owner is owed to the fact that the mobster gave him a 50k loan and got 200k back. "See - the guy still is business thanks to my 50k loan!" Never mind that he overpaid him 140k on the loan.

That individuals like him and the likes in WOLF OF WALLSTREET are praised and lauded is quite telling. Morals, who needs them? What matters is who has the best fun, the best women and ends up with the biggest bank balance in the end.

Oh - and not that the major banks are doing things in a much more ethical manner - they have scams going on which make this guy look pale in comparison.

Post: #18

If he was smart at all he wouldn't have been ok with the article or participated in it. I am sure he will be getting a lot of interest from authorities. Hubris, greed and ego will fuck you up. Mixed in with younger peoples obsession for attention. Bad combination.

Post: #19

Sounds like another Jordan Belfort

Post: #20

Penny stocks? The real pump and dump.

Post: #21

He left the penny stock game for the most part, is renting two floors on 40 Wall St...I'm guessing that rent is ridiculously expensive. Penny Stocks are 1/12th of his business now he says. Hes trying to become a music and entertainment mogul.

This article and how he committed the scheme should never have been made public. I guarantee you based on this information going public there are now dozens of more people doing it.

I don't get why people are talking about how hes taking a big risk of the company being worthless...a lot of these companies will go all the way down to shares being valued at 0.000000000001. He can still sell at that price. He gets the shares at the price on the day he converts the debt so he locks in a 40+% discount on shares. It's not as if she shares become public knowledge via an equity offering which would lower the price. When you unload so many shares at a time you are going to drive the price down typically, depending on how big the company is. So on the first $10,0000 in shares he sells he may get 45% profit...the next $10,0000 42% profit...the next $10,000 38% profit and so on. He basically almost guaranteed himself a way to make a massive return. When you are doing 40+% on many deals it's hardly important if 1 in 10 of the companies go completely belly up and you lose all your money.

Penny Stocks are targeted by a variety of scams simply due to the fact that it's much easier to control the market than with Bigger companies. Smaller scams involve people hyping stocks, often all over message boards to drive up the number of buyers and subsequently the price. Meanwhile, the people who are hyping them up already own a sizable amount of stocks and they unload it shortly thereafter.

If you read the article the companies that are massively devalued still get called all the time by other companies trying to do the same thing Magna did. It's 100% sleazy but I'm not sure whether he broke the law or not. If he broke the law then we may very well see him forfeiting his assets. If not, then the guy with a little reasonable investing / business acumen will likely one day become a billionaire due to having so much money already at such a young age.

I'm curious if one could turn a big profit simply shorting all penny stock companies with a low price and high trade volume.

Post: #22

I predict he loses all of it.

Post: #23

Maybe it's just me...But where i grew up, guys who did stuff like this were called loansharks.

Post: #24

(03-13-2015 05:05 AM)Sp5 Wrote:  

(03-13-2015 04:05 AM)Zelcorpion Wrote:  He is not trading penny stocks but lending them money and then fucking them over legally or when they happen to turn around or liquidate.

It's actually a good idea, because the valuation of a company often does not reflect their real life assets, but more future projection of earnings (if even that).

But hey - it's fine doing that, albeit his business is similar to a 1980s corporate raider liquidating a company - his trick is to fuck the company over while giving them a loan. Good hustle - could be done in other countries as well, but you have to have some cash for it beforehand.

You'd also need a good legal system to enforce the debt instruments. Having a legal basis to sue is one thing, attaching the assets, getting a judgment and reaching and applying the assets to it is another.

PREACH!

Post: #25

There is nothing new about what he did. He bought a warrant from the company at a deep discount. That's it. When it's time, the company can either pay (buy back the warrant) or issue the stock which he liquidates immediately at market value for a large profit.

Just another parasite sucking red.

Banks run the same scam but on a much larger scale. Their targets are entire nations.