Benzinga's Exclusive Interview With Melissa Davis From The Street Sweeper (BGBR, THC, NNLX, GS, IMGG, JYHW)
Melissa Davis runs the corporate watchdog site thestreetsweeper.org. She was nice enough to grant Benzinga.com an exclusive interview. Her site is focused primarily on the risks involved in micro-cap and small-cap stock investing. She previously spent 7 years working for the TheStreet.com as an investigative reporter. The Society of American Business Editors and Writers (SABEW) has recognized Melissa for her accomplishments with a prestigious "Best in Business" award for online enterprise reporting. In addition, both the Society of Professional Journalists and the Associated Press have previously given her top honors for her business coverage.
This interview is also available as Benzinga Podcast Episode 6
Q: Benzinga.com has been covering what appears to be a pump and dump scheme in shares of Big Bear Mining (OTC: BGBR). Are you familiar with that stock?
A: Yes, that is actually the story I am working on right now. The volume in this stock is incredible.
Q: Do you think that some of the volume in these stocks are a result of manipulators creating artificial volume to attract interest?
A: Well that is what you hear. And I am not speaking to Big Bear specifically, but with these suspected pump and dump schemes there will be that kind of trading to give the illusion of outside interest. Investors will see all of the activity and think to themselves, "wow this is real," and they will want to get involved, and then they end up getting hurt.
Q: What are some of the most memorable cases of corporate dishonesty/fraud that you were involved in?
A: Well, I have actually been doing this for awhile. I am from Oklahoma, and I use to work for the Daily Oklahoman, covering publicly traded companies. I actually started out covering a company called Pre-Paid Legal Services, which is headquartered in my hometown. At the time I was covering it, there were some major accounting issues which evolved into actual business practice questions.That coverage caught the attention of Herb Greenberg who was working for TheStreet.com and was covering Pre-Paid Legal at the same time. He recommended me for a job at TheStreet.com. I began covering energy trading companies, because Enron had just collapsed, but eventually I moved on to other companies that were having problems. One of which was Tenet Healthcare (NYSE: THC), which is a major hospital company. The stock had already come down significantly over issues regarding their financial statements. I covered that company for a couple of years. That one was different because it wasn't just about investors getting hurt. The company was actually making a lot of money off of unnecessary heart surgeries that were killing people in many cases. They ended up paying out a settlement of over $300 million to settle claims brought by victims. That was probably the most memorable case because it actually went beyond just financial harm, there were people who actually died. That was a very tragic situation.
Q: How did that situation resolve itself?
A: All of their management which was there when I first started covering Tenet (THC) is gone. They paid a big settlement to the government, they paid shareholders, and they paid the patient's families. The stock has never really recovered.
Q: What are you currently working on?
A: I am almost finished writing my story on Big Bear Mining (BGBR). Prior to that, I was working on a story on a company called Clear-Lite Holdings (OTC:CLRH), which is another penny stock I had covered in the past. The stock has since collapsed. Several people had started tipping me off about Big Bear earlier in the week, so I started looking at it on Tuesday and I have a 2,000 word story just about ready on the company.
Q: What was the last company that you covered?
A: A company called Nanologix (PINK:NNLX). That one is kind of interesting. It had caught my attention because there was some promotion and the stock had run up. I started doing research on the company and looking at its background. There were some questionable spots in the company's history, but it was under new management. The CEO called me back and spoke with me. He was unaware about the promotion and as a matter of fact, as soon as he saw the promotions they told the promoter to take the company's logo off of their website. In this case, it seemed as if the company was almost a pawn in the promoter's scheme. The promoter's don't care about the company, they only care about the stock. That was the first time I had covered a company where they were really mad about the promotion.
Q: Have companies stock prices fallen as a result of your reporting?
A: Sometimes on the day that our stories come out the stock does go down, but oftentimes it takes a little while. Many of the companies that we cover, however, have lost 75% of their market cap. I think all of the stocks have eventually gone down.
Q: What is your opinion on the SEC's fraud charges against Goldman?
A: Well your glad that they will go after anybody. If they will go after Goldman Sachs (NYSE: GS), they will go after anybody. I think it is going to be a very hard case. Goldman Sachs (GS) will obviously have very smart lawyers and they will fight this very hard. At least it sends the message that no one is off limits. On the other hand, now that the SEC is focusing on these really big cases, the smaller stocks that I cover are flying lower under the radar. If it wasn't a priority before, I don't think that micro-cap and small-cap manipulation is even on the SEC's radar right now.
Q: Can your work materially assist short sellers? Can traders gain an edge by following your site?
A: On our home page, we post the price of the stock on the day that we first cover it and the current price of the shares. A review of the price changes in these names speaks for itself. I think almost every single one of the penny stocks we cover has gone down, many of them dramatically. So I would say yes. That is not my primary priority though. I am more interested in getting the people who have bought the stock out of it before they lose all of their money.
Q: How prevalent are penny stock schemes?
A: I get so many tips, I can't cover them all. Big Bear Mining (BGBR) stands out because of the massive volume. There have been others that have also had high volume, such as Imaging3 (OTC:IMGG) and Jayhawk Energy (OTC:JYHW). We actually need more people to cover these micro-cap stocks.
Q: What are some of the red flags that you look for?
A: Usually there is a stock promotion going on. Somebody will send me the mailer or the email message. So then I will look at what they are saying about the company and usually the claims are just wild. So then I go to their regulatory filings to compare what is being said in the newsletter and what is being said in the filings. They rarely match up at all, not even close. So then I will look at the executives list, the auditors, the transfer agent. I hope that they have unusual names so that I can search Factiva, the internet, etc., and I usually come up with something.
Q: Do you think that corporate dishonesty and fraud are significantly higher, about the same, or lower than most market participants perceive?
A: I think that people are more skeptical now because of the financial meltdown, but I still don't think they are skeptical enough. On the left side of our website, we post summaries of all of the fraud actions, SEC actions, and Department of Justice actions and everyday it is 7 or 8. People still don't appreciate how much of this is going on. Its almost like you are playing against the casino, especially with these penny stocks. I think the SEC is serious about cracking down on fraud in general, but I think that they should have a small division that focuses on nothing but penny stock pump and dump schemes. There are certainly enough cases to keep them busy.
Embed this podcast:
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Posted-In: Benzinga PodcastLong Ideas Short Sellers Short Ideas Small Cap Analysis Movers & Shakers Trading Ideas General
