RJD Green Inc. (RJDG) Smells Like Pump and Dump
The share price of RJD Green Inc. (RJDG) skyrocketed in the first couple of hours of today’s trading session after a last-minute promotion managed to attract unusually high trading interest towards the company’s stock. However, despite the pompous words of promoters, RJDG holds some red flags which may suggest that the exultation around its stock may not end well.
First, let’s recapitulate RJDG performance until now. In short, two hours after the opening bell RJDG trades 114% higher than the previous close at $0.214 per share. In the mean time almost 8 million shares of RJDG common stock have changed hands, which means that so far more than $1.6 million have been turned over in this particular trade.
While RJDG share price is going through the roof on an unusually high trading volume, many investors are probably watching this bullish scene confused as there hasn’t been any significant press releases issued by the company recently. In fact, twenty minutes after the start of today’s session penny stock investors were attacked by a dozen promotional newsletters issued by Stock Mister and its related websites, which are considered “the heavy artillery” of promoters.
Some promotional databases estimate that this particular campaign had cost as high as $750,000. And the only reason why a third party would make such a serious investment in a single promotion is that he expects to make much more than this sum by speculating with the stock once it gets inflated enough.
There is one very peculiar thread in the case of RJDG which starts in the recent SEC filings of the company. The last 10-Q of RJDG shows that on March 18, 2013, the company had issued 175 million shares of its common stock to Zahoor Ahmad “for conversion of debt payable to a related party”. This transaction resulted in a change of control of RJDG and the entity Zahoor Ahmad now signs as CEO of the company.
A couple of days later RJDG executed a 2 for 1 stock split which increased the outstanding shares of the company to 425,500,000 and the number of shares held by Zahoor Ahmad to 350 million. A forward stock split can often be a red flag before pump-and-dump schemes because this way third parties have much more shares to unload on the artificially inflated price of the stock.
But this is not the only concern here. The entity Zahoor Ahmad was recently involved in a similar pump and dump case which affected another penny stock company called Primpco Management Inc. (PMCM). In February this year, PCPM attracted a lot of attention thanks to a large-scale promotional campaign. At that time Mr Ahamd was the CEO of PMCM and it turned out that several months earlier he had acquired 8 million shares in the company granting him 85% beneficial ownership in PMCM.
According to official filings Zahoor Ahmad had purchased these shares at $0.04 and at the time of the promotion the price of the shares had reached $0.25. However, the value of PMCM stock plummeted shortly after the promotional campaign and today it trades at $0.0024 per share.
Curiously enough PMCM, like RJDG, had also increased the number of its authorized shares and executed a forward stock split prior to the promotion and after Mr. Ahmad acquired 85% of the company.
RJDG case is so similar to PMCM that it practically smells of the same pump and dump scheme. The financial state of the company can add more fuel to this suspicion as the reports would suggest that RJDG is “almost” a shell company. For example, the last 10-Q of RJDG shows that as of Feb 28, 2013 RJDG had $1,000 cash which was the only asset of the company and $26,000 in liabilities. In addition, for the same period the company generated a revenue of $1,000 and a net loss of $3,000.
In fact the financial plight of the company is only another red flag that flashes on the horizon. In summary, there are enough reasons to believe that the current surge in the value of RJDG is nothing but a smoke-and-mirrors effect produced by nicely compensated promoters. Therefore, investors will have to carefully estimate their risk tolerance and speculation limits, if they decide to gamble with the hype around RJDG stock.