I also completely agree with the fact that stocks are valued on perception. It doesn’t matter if a company earns $5 per share in profits, if no one knows about it or cares about it, the stock will be “fairly valued”. The opposite is true as well; over the years, many stocks have had absolutely no value but yet traded at high prices. Again, its all about perception.

Also I agree that almost all stocks that advance in the microcaps can be classified as pump and dumps. However, they are not identified as pump and dumps until the first big correction occurs.

I have seen countless stocks move up day after day after day for weeks with only a few people talking about them then suddenly, they have a blow off top and then people come out to declare them pump and dump.

One email I received today was very interesting. They were a long term holder of SPNG but were very concerned that 3 8Ks have been issued over the last few months increasing the shares authorized… hummm… That is usually how these big runs end; management issuing too much stock. Even a beast like SPNG has a finite appetite… LOL

I’m not sure why so many people are divided on this stock. It’s a stock, just like any other stock. The value is decided by what people perceive the stock is worth. I really think every stock could be called a pump and dump. I’m guessing everyone’s stock in almost every market went down between October and March. Would you not consider what happened to the blue chips a “dump”?

The market is based on fear and greed, thats it. We have left the time of investing in a company because of it’s value far behind. When Microsoft fell from $30 to $15 after showing record profits and positive EPS with still paying a dividend, dump!

Sponge tech is a real company with real products, it spends mass money on advertising, it is developing new products, it has great outlets for sales, etc…. Shouldn’t the owners be rich from their success up until this point? If I owned the company, I would be dancing in the streets. 20% profit margins on its products selling in Costco, Wallmart, Walgreens, Jewel Osco, etc…

What does all this mean for the stock, nobody noes! Could it fall to a nickel, yes. Could it jump to a quarter, for sure. Could it go to a dollar, yes. If you look at Rite Aid (RAD), you can see how a stock goes from .25 to 1.97 in a month.

The funny thing is, Sponge tech showed more profit this year than Rite Aid. Funny how this market works. The one thing I know for sure is that when sponge takes the next ride up, even the haters will jump aboard. Then they will all jump off and yell “pump and dump”!

If everyone that owned SPNG set their ask at $1.00, the stock would be worth $1.00.

The one thing that is good for SPNG is that it has finally touched it’s exponential moving average for a one month time table. The next week or two will tell the true direction of the stock. RAD pulled back to $1.25 after it’s run and has also touched it’s moving average.

Happy trading,

Dave