Sunday, January 09, 2005

The Rogues Gallery: Are 'Paid Bashers' Working Against ERHC?

On the Raging Bull ERHC message board, a new poster named gary3699 has offered a strong argument for the case that paid "bashers" - people who malign a stock on message boards and elsewhere on behalf of persons with a short interest - may have targeted ERHC for their attacks.

Though SEC Regulation SHO may or may not force the market makers to cover (I suspect not, at least in the near term), it does indicate to us that market participants are naked short, which has affected the true current value of our stock. The acknowledgment of the millions of market maker naked shares, in my opinion, does reveal they probably employ bashers on this board to manipulate share price. Tens of millions of dollars, if not more, are at stake for them, Bashers are here day and night to cloud your judgment. Don't let them fool you. ERHC may not have much cash in its accounts presently, but its oil rights alone will bring much wealth to investros.


The persistence and patterns of the "bashers" are familiar to many posters. Usually, the very first post is one that asks for an explanation of a "going concern" statement from a recent annual or quarterly report. This tends to be a fishing expedition, with the bashers trolling for faint-hearted investors who are unfamiliar with the stock and with bashers - usually newbies that have recently invested.

If they are able to reel in a newbie, they will quickly seduce the person with posts of negative materials and statements from all kinds of sources, legitimate and otherwise. If things proceed according to plan, this person will then join their corps of attackers - but won't be getting paid for it. The bashers will continue sowing doubt that may at some point discourage older investors. Any genuine negative news that comes their way will be exploited to the hilt, while any good news will be ignored. In the event of a rapid price rise, the bashers will quit posting and disappear; if the price starts to fall, they will resume their attacks.

On the message boards, many longer-term investors typically TOS the bashers on their first appearance, at the risk of leaving themselves unaware of others on the board who may be getting reeled in, and of failing to spot authentic negative stories that they need to know about. Their abrupt reactions startle the newbies, who tend to be more open to persuasion by official data like SEC reporting. The bashers mount vicious attacks against the veterans and the veterans who have not ignored them respond in kind.

As the message board deteriorates, the mid-term investors who are less certain of all the virtues of their stock adopt the posture of the veterans but without all of the discernment. They begin to TOS or put on Ignore anyone who has anything to say that might be construed as negative. These investors have the most to lose by doing so; the veterans can tell the difference. Fairly quickly, the boards become useless as a real tool for investors' due diligence research.

Conversely, the "pumpers" are those who will brook no argument when they say their stock is the greatest investment in history. They frequently predict breakthroughs, press releases and price gains without any basis other than their raging desire to rake in profits on their earlier purchases when the stock opens slightly higher in the morning, only to sell it again before it falls toward the middle of the trading day.

These "swing traders" make their money in increments as low as $25 to $50 dollars, and sometimes manage to take in these small amounts several times a day. At the end of the week, they count a $500 gain for a few minutes' work each day well worth the effort. This is a pattern that is extremely common in ERHC. However, to their credit, no one is paying them to do it.

ERHC suffers from all of these deceptive players, some of whom work together to play the whole message board against itself. A clique of four or five such players on either side frequently dominates the entire board; they are careful to provide news only when they have already profited from it, and to avoid exposure of their corporate or other ties to allied investors, who may be sitting beside them in Boca Raton or New York or Denver at the very same stock brokerage.

Between the bashers and the pumpers are the long-term investors in ERHC who play it straight. A good example is Ruby1100, who has a nose for news that is better than most most reporters'. She will jump on a positive news report almost instantly upon its appearance anywhere on the Internet, and share it with the entire board. The posts she writes are rarely superfluous and never deceptive. Balance_Builder is another. He offers analysis that usually tends towards the optimistic, but is always sound. Of all posters on the Raging Bull ERHC board, he may the most highly regarded.

The players that are hardest to categorize are most likely those in the "swing trader" group, possibly including walldog, tiburon tim, swingin' ---k, thingbig10, the tuneman, redinvestor ("Red"), and a few others. They are the gladhanders, the high-fivers, the backslappers and noisemakers of the board. They are intensely distrustful, and at least in my opinion, are the least trustworthy (outside the basher group). For them, tomorrow is always the big day, the day all of us will make a killing. I suspect that they are the ones who game ERHC day by day, rarely making a killing but often bringing home their $500 a week.

The straight players on the RB board, like dougquaid, platina, tradertrades, ddkim,
stockhocker70, oiljunior, and others may often disagree with me but aren't ever intentionally deceptive (although like everyone, including me, they are sometimes wrong).

More problematic is the player who just got TOS'd, rancho60008, who along with swinging ---k was spoofed by bashers. rancho60008 is on a relentless search for connections between those in the company's meagerly-documented past, paid bashers and market makers who may be assisting them. It is a lonely battle with a lot of detours, false leads, blind alleys and misadventures on the way to paydirt. He runs afoul of the swing traders, who criticize him relentlessly, because he often seems to be just on step away from identifying some of them and documenting their connections. But when he fails to post the findings he claims to have made, or parcels them out so stingily that they don't amount to much, he wades into a storm of derision and criticism. For him, the downside is that when he is finally proved right, he gets or will get very little acknowledgement because the river has moved on, so to speak, and those who might most praise his work are those most hurt by it; they know that he sometimes knows whereof he speaks, but would rather others did not.

Where would I place myself among thse players? I have 122,000 shares I paid $53,777 for and that are now worth worth more than $58,500, yet I never avoid the negatives when it comes to ERHC. My long experience in journalism has taught me to keep an open mind until the very end, but to also nurture the original viewpoint that moved me to get involved in the stock.

For me, that was formed by the article by Ken Silverstein of the Los Angeles Times Washington bureau, a most uncommon business writer who seems to have a deep interest and affinity for African business. I have spoken to him at length on the telephone, and also corresponded with him twice. When we spoke, he told me he thought an investment in ERHC would eventually pay off, and based on that and the other facts that have come to light I have always held a pretty unshakable faith in the ultimate worth of this investment.

I sold my first holding of 175,000 shares when the sprice spiked to .43 and made a $27,000 profit. On the second spike, due to my own miscalculations, I sold at .93, but began repurchasing in the low .70s, .60s, and .50s. I eventually dumped all that to eliminate my margin position (which also makes my shares impossible for E*Trade, my broker, to short), and ended up with a $5,000 profit.

My current average is .44065, so I am a little more than $4,924 ahead at this point; I want to make $80,000 or more with that investment between now and Feb. 22. My exit point is $1.20, although I think the stock will actually go to $1.28. It will do much better down the line, and I will likely be there with it; I hope to repurchase in the .60 - .75 range by mid-April if the buyout I have predicted for March does not come about (although I think that in part it already has).

What lies ahead? Well, it's going to get a lot more exciting, I think, until the awards are complete in both the JDZ and the EEZ, and then it may get kind of boring for a long time. I'll use some of my money to keep my hand in ERHC, but also start looking for other more secure investments to fund a long European vacation.

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