Coverage initiated on PacWest Equities (OTCBB: PWEI) — Strong sell, price target $0.06

Update 10/17/2012: Following the huge crash in PWEI stock yesterday I have greatly reduced my technical price targets; my two-week price target is now $0.04 and my one-month price target is now $0.01.

For my inaugural research report, OTCMicroCapResearch.com reports on PacWest Equities Inc. (Pinksheets: PWEI). This company is one of the most blatantly worthless companies that I have ever seen and the only reason the stock has traded significant volume recently is due to a $500,000 stock promotion (pump and dump) campaign. At a closing price yesterday of $0.665 and with 471,560,143 shares outstanding, the company has a market capitalization of $313 million, yet by my estimation it is worth at best $5 million (and that is being generous). Sanity will soon return to the stock price and current shareholders will likely face losses of 90% over the next month. This report will cover the pump and dump campaign and the company’s fundamentals. I will not discuss the various people who have been involved in the company: interested readers should consult this great article on PromotionStockSecrets.com that delves into the history of the company since it was incorporated. The anonymous person or persons behind Infitialis also have a report on PacWest coming soon [Edit 2:15pm EST 10/16/2012: Infitialis article published on SeekingAlpha at 2:20pm]; Infitialis has done great research on past pump and dumps such as Chimera Energy (OTCBB: CHMR). (This website has no connection to either Infitialis or PromotionStockSecrets.com.)

The Pump and Dump

Prior to four days ago, PacWest Equities Inc. (OTCBB: PWEI) had barely traded. Yet the stock traded over 90 million shares on October 9th. Did the company have some blockbuster news? No. While the company announced an acquisition that day, the press release was not sent out until the market close. The sole reason for the stock trading so much is that it has been promoted aggressively by a stock promoter by the name of Victory Mark Corporation Limited (hereafter referred to as ‘Victory Mark’) that purports to be based in Belize. The three websites of Victory Mark are PreferredPennyStocks.com, SelectPennyStocks.com, and HeroPennyStocks.com. These websites have advertised heavily on major search engines and elsewhere on the internet to get people to sign up for their stock touting newsletter, starting from the beginning of this year. Victory Mark discloses that they were paid $500,000 to promote PacWest. As with all pump and dumps, the purpose of the promotion is to find idiots to buy the stock so that large shareholders can sell their shares.

The compensation disclosure on PWEI:

Selectpennystocks.com is owned and operated by Victory Mark Corp LTD, 4 Lords Bank, Ladyville, Belize City, Belize. Questions regarding this website may be sent to info@Selectpennystocks.com. The company expects to receive $500,000 USD from a third party for publication of this information.

A screenshot of one of Victory Mark’s Google ads.


Victory Mark ad for PWEI on a Youtube video page (click to enlarge)

The first stock promotion emails I received on PWEI came at 9:30am on October 9th, 2012 with the stock at $0.158. As I write this the stock price ended the fourth day of the stock promotion at $0.665. At that price, the company has a $313 million market capitalization. The stock has already seen a huge price increase on extraordinary trading volume and it has already reached the highest peak market cap of any Victory Mark stock promotion (excepting the promotions that also involved Awesomepennystocks, another major stock promoter, which is not promoting PacWest). It is my estimation that the stock has hit its peak or is close to hitting its peak. Obviously I have no crystal ball and in the next few days the stock could do anything. But as with prior pumps by the same stock promoters, I expect the stock to drop 80% or more in the week after its peak. To be conservative, I will estimate that PWEI will take two weeks to drop and that it will only drop 60% over that time period. Therefore, my two-week technical price target is $0.26. My one-month technical price-target is $0.06, which is a similar percentage drop to the past Victory Mark Corp. Ltd. stock promotions.

Below are details on the other stocks that Victory Mark Corp. Ltd. has promoted by itself (they promoted NSRS, SNPK, and GWBU along with Awesomepennystocks.com). Marvel at the huge volume that this stock promoter brings and then the total destruction wrought upon witless investors and traders.

RARS - Rarus Technologies. The first emails I received promoting this stock arrived at 1:44pm EST on May 9th, 2012. Just prior to the stock promotion emails being sent out the stock traded at $0.32. The stock peaked at $0.59 that day, giving it a peak market cap of $256 million. By the end of the fourth day of the stock promotion, the stock was at $0.097, down 83% from its peak.

The compensation disclosure on RARS:

Selectpennystocks.com is owned and operated by Victory Mark Corp LTD, 4 Lords Bank, Ladyville, Belize City, Belize. Questions regarding this website may be sent to info@Selectpennystocks.com. The company expects to receive $20,000 USD from a third party for publication of this information.

CTDT – Sweet Water Resources. This company was promoted right after a ticker change from SWTR. The first promotion emails arrived in my inbox at 9:35am EST on July 9th, 2012 when the stock was at $0.105. The stock peaked at $0.41 four days later. At its peak price the company had a market cap of $29.9 million. Just six days after its peak, CTDT closed at $0.03, down 92% from its peak.

The compensation disclosure on CTDT:

Selectpennystocks.com is owned and operated by Victory Mark Corp LTD, 4 Lords Bank, Ladyville, Belize City, Belize. Questions regarding this website may be sent to info@Selectpennystocks.com. The company expects to receive $500,000 USD from a third party for publication of this information.

MDMC – Marine Drive Mobile. I received the first promotion emails on this company at 9:34am EST on July 23rd, 2012, when the stock was at $0.16. The stock price gradually moved up for almost two weeks before hitting a high of $0.505 on the same day it dropped precipitously. At its peak the company had a market cap of $19.3 million. Four days after hitting its peak, MDMC closed at $0.07, down 86% from its peak.

The compensation disclosure on MDMC:

Selectpennystocks.com is owned and operated by Victory Mark Corp LTD, 4 Lords Bank, Ladyville, Belize City, Belize. Questions regarding this website may be sent to info@Selectpennystocks.com. The company expects to receive $500,000 USD from a third party for publication of this information.

The trend from these prior promotions is quite clear: the stocks rise for awhile, usually a few days (but as few as one day in the case of RARS or as many as ten days with MDMC) before dropping precipitously and then continuing to drop until down more than 90% from its peak in a month.

Fundamental Analysis

The most important part of any fundamental analysis of PWEI is to note that the company does not file financial statements with the SEC. It has filed some limited financial statements with OTCMarkets.com, but those statements are lacking in detail. The lack of SEC filings is a huge red flag, and I cannot overemphasize that point. This means that the company does not have to have audited financial statements (and it doesn’t — the annual report filed in March, unlike annual reports filed with the SEC, is unaudited). Large shareholders do not need to file with the SEC when they sell stock, so there is no way to tell if large shareholders are unloading their shares onto the gullible public. Also, the company does not have to inform shareholders in a timely manner of material news — while the company would break the law by lying in press releases, it is free to keep shareholders in the dark. I will come back to this point in a little bit.

The most recent financial information the company has filed is an interim financial report published on October 11, 2012 that covers the quarter ending June 30, 2012. Per that report, as of June 30, 2012 the company had $476,160 in ‘other assets’, its only assets, and $23,582 in current liabilities, its only liabilities. The company had no revenue in the quarter and a net loss of $23,582. This is not what the financial statements of a $313 million company look like. But PacWest’s balance sheet is much worse than it looks at first glance. The company has no current assets (cash and bank accounts and accounts payable) and all its assets are simply lumped together as “other assets” with no details and no description elsewhere in the quarterly report. This lack of detail is worse than what I would expect from a $10,000 single-owner private company, let alone a public company with a $300 million market cap.

Going back to PWEI’s 2011 annual report gives details on 300 million shares the company issued for acquisitions and joint ventures. First let us look at the acquisition of ACT Clean Technologies, which was another publicly-traded company (on the pinksheets). This was paid for with 150,000,000 restricted shares. ACT Clean Technologies was involved in a pump and dump back in 2010 that led to the SEC suspending trading in its shares for two weeks. Due to the sordid past of ACT Clean Technologies and its lack of significant assets or sales in 2010 when it last filed financial statements, I ascribe zero value to its assets.

The other acquisition was of e-Green Marketing, for which PacWest paid 100,000,000 restricted shares. The acquisition of e-Green Marketing brought the company the Green Rhino all-purpose cleaning product. Then PacWest entered into a joint venture with Symbiotech to market Green Rhino to the military. While PacWest does have some nice-sounding copy about the great market opportunities they are pursuing with the acquisition and joint ventures, they are either poor opportunities (Green Rhino cleaner is in the brutally competitive all-purpose cleaner market) or vague. From the annual report:

For obvious reasons, we particularly favor and focus on the expanding “green market” products as a key component of our PacWest strategy. Our most recent example of this program is the acquisition of Green Rhino, Inc. and our partnering their products with other industry leaders and marketing /distribution programs.

Specifically, we have found Green Rhino™ provides an excellent product line of powerful biodegradable all-­‐purpose, non-­‐toxic cleaners that can be coupled with a heavy duty equipment parts and military weapons washing systems using our proprietary bio-­‐ remediation process. Green Rhino™ will be launching mid-­‐2012 to key markets nationally and simultaneously exposing these products to the international markets.

Pac West Equities is also initiating Joint Ventures with e-­‐Green Marketing and Symbiotech.

• e-­‐Green Marketing specializes in bringing clean technology and eco-­‐friendly products to market with the understanding that while the social and ecological benefits of going green are important so is the need to be profitable.

• Symbiotech is a Service Disabled Veteran Owned business formed to identify gaps in technology, primarily in government agencies, and match existing or emerging technologies to fill those gaps.

What exactly did PacWest get for 300 million shares? Unfortunately we cannot know for sure — the company has no filings between November 2010 and its annual report filed on March 20, 2012 and it does not give a detailed description of the assets of the purchased companies.  The company has had zero revenues through June 30, so sales of Green Rhino must be nil. And as mentioned above, the company’s total assets have a book value of less than $500,000, so the acquired companies must not have had much in the way of assets. Given the lack of sales and assets, I ascribe a very charitable value of $1,000,000 to the Green Rhino assets and ventures.

PacWest’s quarterly report for the quarter ended June 30 mentions another acquisition the company made: the company issued 155,000,000 shares for the acquisition of “another company” in April. The only details of this deal that was hugely dilutive to shareholders was this sentence: “In April 2012 the company again acquired another company for 155,000,000 shares of common stock.” Furthermore, these shares are described as free-trading shares (on page 14) whereas the shares for the earlier acquisitions were restricted shares. This acquisition was not described until the company put out a press release six months later, on October 9th! Even then, few concrete details were given. Needless to say, this is a profound failure to notify investors of a material event in a timely manner. What exactly did the company acquire? According to the press release (only the description of PacWest and legal boilerplate are omitted from the quote below):

LAS VEGAS, NV–(Marketwire – Oct 9, 2012) – PacWest Equities, Inc. (PINKSHEETS: PWEI) today announced that it has acquired World Eco Source Corp. of Belize City, Belize. The stock symbol of PWEI will not be changed. World Eco Source Corp. is a technology-based company which has developed the MobileFeed® and MobileFood® systems helping offset deficient, worldwide food production for both animals and humans.

The World Eco Source MobileFeed® and MobileFood® units provide turnkey systems for either the production of livestock-based consumables or human-based protein and vegetable consumables. The MobileFeed® units are truly a global sustainable, green life cycle farming system. Using both solar power and water conserving growing systems, one trailer can produce 1,500 pounds daily of organically grown grass for year round livestock consumption, thus lowering feed costs by 80% while producing Certified Organic, Grass Fed livestock and increasing profitability of the final product.

The MobileFood® units enable the rapid production of certified, organic vegetables and proteins for humans through life cycle harmonic integration of fish farms and hydroponic vegetables, with one half of the system feeding/fertilizing the other half, and vice-verse. Raising Tilapia side-by-side with vegetables and using the same water from the fish to fertilize the greens is not something new, but by combining the hydroponic know-how with World Eco Source patented technologies, the outputs have finally become commercially feasible.

Whatever it is, it sounds great! But there are few details in the press release or on the company’s website. With the company’s ticker symbol on its homepage, World Eco Source’s website seems to be designed to sell the company’s stock rather than its products. A follow-up press release announcing a purchase order for one of its MobileFeed trailers contained few other details about the company’s products. Furthermore, I could not find any evidence of the existence of the customer, K. Hill Livestock. While I am not saying that they do not exist, they are most likely not a large operation (see this listing of large producers of grass-fed cattle in Hawaii).

Anytime I see a company with brilliant-sounding products that just happens to be a penny stock company, I take a step back and ask myself what kind of resources would be necessary to develop and manufacture such a fabulous product? The answer is usually a hefty sum of money, far more than that penny stock company has. And in cases like this where a penny stock company acquires another company with a supposedly great product, the question becomes this: if World Eco Source Corp. has such a great technology and potential business, why did they sell themselves to a company with almost no assets that does not even report financials to the SEC? One could argue that this is a reverse merger and World Eco Source Corp. just wanted PacWest’s public listing, but there are plenty of fully SEC-reporting companies available for such reverse mergers, and the prior owners of World Eco Source could have easily gotten a much better deal than receiving only 1/3 of the shares of the public company they reverse-merged into (which is the proportion of PacWest’s shares that they received). So if World Eco Source’s product were truly great, they would have many other options available to them, such as obtaining venture capital funding, selling out to a larger company, or reverse-merging into an SEC-reporting company where they could end up with more than 1/3 of the shares. For these reasons, I am highly dubious of World Eco Source having any viable business. For the sake of argument, especially considering how PacWest as a whole has under $500,000 in total assets, I ascribe a value of $1,000,000 to World Eco Source.

PacWest put out another press release the day after its press release about the World Eco Source acquisition. I really cannot overemphasize how absurd the press release is. Below is the relevant part of the press release (I exclude only the descriptions of PacWest and World Eco Source and the legal boilerplate):

LAS VEGAS, NV–(Marketwire – Oct 10, 2012) – PacWest Equities, Inc. ( PINKSHEETS : PWEI ) today announced that it has entered into a Letter of Intent to purchase PurGro Electronics, LLC in exchange for cash and stock, in a deal valued at US$15M. Included in the proposed transaction are PurGro’s current sales volume of $1.5M annually along with 5 international patents pending in China and 11 patents to be filed in the US.

This acquisition could propel the Company and its wholly owned subsidiary, World Eco Source Corp., to quickly become the leader of technology-based Organic Food Production companies. When coupled with World Eco Source’s unique MobileFeed® and MobileFood® systems for year round organic food production, even in the harshest of climates, PurGro’s technological advances in the automation of hydroponic growing systems make sense in this key acquisition.

PurGro’s proprietary, automated growing solutions virtually eliminate the need for human interaction in the growing cycle, with automatic temperature, humidity, and watering programming. Any variations in the preset optimum growing environment cause the system to immediately send out text and email alerts to prevent a disruption in the growing cycle. When combined with World Eco Source’s proprietary water and electrical conservation techniques, the economic gains make the MobileFeed® and MobileFood® systems sustainable and profitable.

PacWest has already shown in its financial statements that it has zero cash — and not just zero cash, but zero current assets (anything that can be quickly turned into cash). World Eco Source must also have zero cash because that is the company that PacWest acquired back in April for 155,000,000 shares, and if it had cash then that would have shown up on PacWest’s balance sheet as of the most recent quarterly report (June 30th). The company has not indicated that it has raised capital since then. So either the cash exists and PacWest has neglected to inform shareholders where it came from, or the cash doesn’t exist. If the cash doesn’t exist, then the acquisition cannot be in both stock and cash and the press release is a lie. So the best case scenario is that the company has neglected to inform shareholders of a capital raise that would likely have been quite dilutive.

Even despite all these questions, I will assign a multiple of two times sales to PurGro to value it at $3m. Adding this to $1m for the Green Rhino assets and $1m for World Eco Source gives me a sum of the parts valuation of PacWest of $5,000,000 (for a stock price of $0.01). Given its current market cap of $313,000,000, PacWest stock would have to drop 98% before I could consider it fairly valued. And keep in mind that my estimation of value is very generous, especially considering the paucity of information on PacWest and its acquisitions. Simply put, there is so little information available about PacWest or the companies it has acquired that attempting to value it is like playing pin the tail on the donkey on a football field. I recommend that investors avoid PacWest at all costs and that traders anticipate that at some point in the near future this stock will drop very far and very quickly.

Conclusion

It is my opinion that PacWest Equities (OTCBB: PWEI) is essentially worthless as an operating company and the only reason the company has a market cap of more than a few million dollars is that there is a huge stock promotion campaign underway. That promotion will end, likely soon, and the stock will tumble even before the promotion campaign ends. I remind readers that while stock promotions are referred to as pump and dumps, the pump phase is not separate from the dump. From the very beginning the individuals who paid for the promotion have been selling millions of shares and they will continue to sell shares even as the stock drops. In the end, the promoters and the shareholder(s) who paid them will make small fortunes while unwary investors will be left with painful losses.

Disclosure: It is the policy of OTCMicroCapResearch.com to only publish research when neither the author nor any member of its owner, MorningLightMountain LLC, has a direct or beneficial interest in any account that has any position long or short in the securities discussed. OTCMicroCapResearch.com never gets paid to analyze companies and nobody except for the author and editor of this website is notified of research to be published on this website prior to the time it is published or announced on Twitter (this report was announced on Twitter on Friday, October 12th after the market close and published prior to the market open on October 16th). As of the time this article was published the author was aware of a couple people in stock chatrooms he participates in that are short PWEI and several who are long PWEI. No member of MorningLightMountain LLC has any relationship with PromotionStockSecrets.com or Infitialis.

[After this article was published, at 1:12pm EST PWEI became shortable at Interactive Brokers, the author's broker. He sold 5,000 shares short at .305 and covered the position less than a minute later at .2989 for a profit of $13 after commissions. Following this trade I realized that this website's policy on trading covered securities should be more strict and starting now it will be the policy of this website for no one involved to trade any covered security until that security is officially dropped from coverage.]

11 comments

  1. Pingback: My new venture: OTC MicroCap Research » Goode Trades
  2. Pingback: Is PacWest Equities (Pinksheets: PWEID) a bona fide company? Or is it being run for the purpose of selling shares? | OTC Microcap Research
  3. Eric

    So based on your price targets, pre-split your price target was $.013 per share by October 30 and $.0033 by the middle of November. Considering the stock closed at $.60 a share today I’d say your targets were a little off. These reverse pumpers are as dangerous to “investors” if not more than the pumpers themselves.

    • MichaelGoode

      I freely admit that my price targets were way wrong. My goal with this website is not to give advice on how to trade pumps but rather to inform the people duped by the lies and misinformation that pumpers (and pumped companies) put out about the true value of the company. For Joe Investor who puts some of his hard-earned money into a stock because they put out all these great press releases, my articles (and others like them) are informative. If I save just a few people some money because I convince them that this company is worthless, then I have done a damn good job. Look at the comments on the Infitialis article on SeekingAlpha about Chimera Energy (CHMR) — there were plenty of people who were duped by the company’s (alleged) lies. Two months later the SEC suspended traded in CHMR. I think it likely that trading in PWEID / PWEI will be suspended in a couple months due to the alleged illegal share issuance. After that happens I’m sure I will get more than a few happy comments from people whose money I saved.

      By the way, cute alias. You are very immature, just like most penny stock traders and promoters. If you are a trader, I hope you realize that a good chunk of any money you make from buying pumps comes from the people duped by the pumpers. And you would prefer that no one tell them the truth so you can get a little extra spending money. That is far more pathetic and evil than any murderer or thief.

  4. Pingback: More contempt for the investing public from PacWest Equities (Pinksheets: PWEID) | OTC Microcap Research
  5. Sandy Plains

    How much do you think Pur Gro was paid in cash? Also how were they paid if the this company has no money?

  6. Pingback: Why trading in PacWest Equities $PWEI was suspended by the SEC » Goode Trades

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