In April 2016 of NeuroMama stock was trading for $ 15 apiece. Four months later, their value exceeded $ 56, and the capitalization of the company amounted to $35 billion — more than the Tesla Elon musk. “NeuroMama is a small search engine, though the creators claim that their business is much more,” writes the editor, CNBC Robert Pisani. The securities Commission suspended trading of the company until 26 August.
The regulator suspects the owners of NeuroMama in the manipulation of the stock. In addition, another reason for the ban, according to representatives of the Department, were “doubts about the accuracy and validity of the identity of the managers of the company”. According to the Commission, the company could mislead existing or potential investors, “publishing information like pending approval of NASDAQ to participate in the auction”. This situation became resonant.
Many asked me the same question. How is that even possible in the 21st century?. This has happened because Im sure the editor CNBC that the companys shares were quoted in the section of the so-called “pink sheets”, which in exchange the US system is the most unreliable. It is known that the new York stock exchange and NASDAQ have stringent listing requirements companies.
Thousands of enterprises that do not fall under these requirements, are forced to participate in the system of OTC trading (OTC). Such shares sold “the wolf of wall street” Jordan Belfort. The listings for OTC trades shall be prepared by the company OTC Markets. There are three “levels” of lists.
OTCQX, OTCQB and OTC Pink. NeuroMama was trading in the section “limited information”. According to CNBC, this subcategory is intended for companies that “want to hide publicly available information on the cause of the economic difficulties, bankruptcy, or problems with the publication of financial reports”.
In other words, such actions can be seen a mile away. Though they do not warn. “Think three times before to contact us, but cause some suspicion. Moreover, on June 16, when the companys stock made its first jump, the OTC Markets have marked her page with a special sign and warned investors about the potential risks.
“The company is of concern and may be associated with the spread of spam, unfair promotion or fraud”. “Its amazing,” says Pisani, ” but a few people, it seems, missed the warning on deaf ears. Or they did it not needed. The price of the stock prior to the closing increased from $40 to $53″.
It could only happen in one case. If the players are on the decline were forced to buy the stock at a high rate for fear of even greater growth. But its impossible — they didnt have on hand the appropriate number of shares. In July, when the price per share rose from 50 to 56 dollars continues Pisani, just traded 3,713 shares, and in August — 250. “Except in this case, the price could climb to 12%.
Dont forget, this increased the companys capitalization of approximately $3.8 billion,” he says. According to financial Analytics company S3 Partners Igor Businesslogo, this situation is possible only in the case when the “limited number of people buys and sells shares of each other, increasing their cost. Representatives of NeuroMama published on the website of the search engine an open letter in which he stated that information published in the media, is not true. According to the document, the lack of financial data is due to the fact that the company was registered in Russia, and American auditors have refused to carry out its assessment.
Now she is re-registered in Mexico, in Rosarito. “Now another American audit company conducts audit and we expect that in the next two months, financial reports are completed and published,” the letter reads. The company has its own version of suspension of trading: August 15, 2016, the securities Commission suspended trading in the shares (NERO) to avoid uncontrolled growth in the value of shares caused by the information boom.
At the moment, the company NeuroMama is preparing an official appeal to the Commission, containing explanatory information and the request to access the shares prior to the completion and publication of all financial reports, which was delayed. According to Pisani, the securities Commission in such cases must be dealt with even faster. However, he explained the delay by the fact that the volume of transactions was insignificant, and the companys actions did not affect a wider audience. However, he noted the necessity of the existence of such platform like the OTC Markets. “Its easy to say that OTC transactions attract fools and fraudsters — a certain amount of truth in it.
However, where securities are traded about 10 thousand companies for which this is the only way to attract the investment necessary for further development. According to the OTC Markets over the last three years, more than 200 companies were able to rise from the OTC market and to get to the lists of NASDAQ and new York stock exchange.