Tuesday, April 17, 2007

Phantom delays their Lapboard 6 more months - Stock quadruples

The pink sheet market is a different beast where Market Efficiency theory usually does not apply. For example, take today's press release from our friends at Phantom Entertainment (formally known as Infinium Labs). In their announcement, Phantom released 4 pieces of bad news:
  • The Lapboard has been delayed 2 additional quarters
  • Phantom has given up the rights to their only product to instead collect royalties
  • They have "switched" manufacturers (Ione/Itron)
  • They have all but left the US markets & have instead entered Asia
In addition, it fails to comment on the company's lack of funding which has been the main reason why the stock has fallen more than 90% the past year. Just last month the company decided to double the number of shares, slashing the current shareholders piece of the pie in half. But these shares are only worth a couple million even after today's rally. Last quarter's cash burn was much more than this amount.

So how did the stock react? It quadrupled from .0006 to .0024! How can this be? First of all, PHEI is an extremely low volume stock that can be moved with great momentum after any news or pickup in volume. But the rally has more to do with the creative way the PR was written. At first glance, it seems very positive. But read into the details & you will see that the real news could send the stock plummeting the next few days:

"PHEI announced today it has entered into a major, multi-product licensing agreement with Ione Technology Inc."
Meaning: We have no funds to build the Lapboard & have sold the rights to another company. Instead, we will receive 5% royalties if it is ever built. It's their problem now! (Ione Technology is actually the same company as Itron, the previous manufacturer. They changed the company name to Itron in 2003. Fradulent?)

"The agreement allows Ione Technology to market an Ione wireless lapboard and Ione wireless laser mouse in markets throughout Asia"
Meaning: We no longer have any credibility in the US markets. Asia has no idea who we are!

"Phantom Entertainment will manufacture the Phantom Wireless Lapboard and Phantom Wireless Mouse throughout the United States and Europe"
Meaning: Even though we have promised this for 3 years and still have no funds to build it, we still plan on launching the Lapboard. Otherwise, we have no reason to still be collecting our gigantic salaries!

"We anticipate Ione Technology will begin production and distribution of the Ione wireless lapboard and Ione wireless laser mouse in the third quarter of 2007"
Meaning: We are delaying the Lapboard for the 6th time so that our investors stick around for another several months (it was originally slated for a 2004 launch date).

As you can see, with a little creativity (and borderline fraud) you can turn any bad news into an optimistic-sounding announcement. It's not difficult to predict how the stock will perform the next couple days once this becomes obvious to the current investors... sell before it's too late!


At 9:45 AM, Anonymous Anonymous said...


As expected, PHEI has fallen 50% in just 2 days as investors have begun to digest the true meaning of Tuesday's PR.

At 1:46 PM, Anonymous Anonymous said...

how much royalties will they receive? can it be any more vague?


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