Uniontown Energy: High Risk High Reward
When stocks are being promoted they seem to be a great choice in the moment, and you may be convinced that it is a great stock pick. Let’s get real, usually they end up causing people to lose money, especially the investors. Being aware of these stocks are important, so we found one to warn you about, Uniontown Energy. Vijay Rao has gathered the time line of information about the promotion of this stock, hopefully it will give you some red flags to look for when looking at other investments.
Promotion:
On 3/23/11, in a press release UTOG announced that it is going to have a 1M share private placement at $2.50/share and that $610,000 had been advanced to UTOG. UTOG said $300K was put towards the Musselshell transaction, but UTOG never mentioned any cash consideration for that land. Also, in its SEC filing, on page 27, it says there were no sales of unregistered securities except for the asset purchase. I don’t know why the SEC filings don’t mention that UTOG is doing a private placement or reference the sale of securities.
On 4/27/11, UTOG announced that it had raised $3M in its private placement by increasing the private placement by 200,000 shares because it was oversubscribed. UTOG also announced that it is currently negotiating a $5M private placement. It seems that UTOG didn’t get the bump in price that it wanted so the next day it released the same press release as a “reminder.” UTOG filed an 8-K on 5/2/10 that is dated 5/2/10 and only references $2.5M raised in the private placement.
All of its press releases have some estimate of POTENTIAL recoverable reserves which are very high when considering the purchase price. It is clearly using aggressive language as its talks about millions of barrels of oil in its properties, but there has been no certified reserve calculation. For example, in the Darby Block Prospect press release the CEO states:
With in-ground oil reserves prices ranging from $10 to $25 per barrel and the Darby Property’s estimated recoverable reserves of 120 million BOE, this acquisition will be a crown jewel in our growing asset portfolio.
It appears that he is trying to imply that this property could be worth over $1B, but to me that sounds ridiculous as UTOG only plans on paying (if it can raise the cash) $17M for it.
In addition to its promotional press releases, if you check the disclaimer pages of various newsletters (here, here, here, here, here, here, here,here, here), you can see the amounts paid to these newsletters for promoting the stock: StockMarketLife.com has already been paid $2.5M and has plans to be paid another $1.4M in the future to have this company promoted; AmericanEnergyReport.com has been paid $2.5M and expects to receive an additional $2M for continuing to promote it; BeaconEquity.com, WallStreet Advisors, OTC Stock Exchange (was paid $20,000 by an entity called EAG), MicroStock Profit (was paid $10,000 by Flip Ventures), and PennyStockCraze.com (was paid $10,000 by Flip Ventures) were also paid to pump UTOG. You can find more examples if you search online.
The promotion has expanded to include a recent Twitter campaign where the AmericanEnergyReport.com report was tweeted by many users paid to advertise it including celebrities such as Jon Gosselin (you have to request to follow Jon to see his tweets).
In addition, SISM Research started coverage of UTOG with an $8 PT. The report was based on Investrend Equity Research’s independent analysis and judgment. Investrend was paid by UTOG and another party, Youngal Group Ltd, in connection with this (see disclosures here and here). I don’t know how this can be called independent research. This report was written by Ernest Schlotter, who has previously written reports for other promotional companies (see here and here).
There is some great information and research in the narrative of this post. However, I think that the chart speaks volumes. I think the moral of the story here is to watch out for these promotional schemes, they don’t usually turn out well for anyone.
Quotes taken from report by Vijay Rao, Read the entire article here.
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