On May 23 shares of daily deals site LiveDeal (LIVE) spiked over 100 percent in highly suspicious trading activity that appears to be spurred once again by nothing save paid PR reports masquerading as news.
LiveDeal has been one of the most talked about tech plays of 2014 thanks to its momentous growth and subsequent freefall. Shares of the company had risen from around $1 a share in early January to $12 in just two months before crashing. As shares neared $2 apiece in mid-May, it appeared that the speculative bubble that had inflated LiveDeal’s price had finally popped.
But that bubble has been re-inflated once again, with the company more than doubling in early trading action on no concrete news. It appears investors have once again been suckered in by a bevy of PR reports from Stock Media Group, a gun-for-hire who issues positive reports on a company for a price.
Using Stock Media Group to pump its price has been LiveDeal’s modus operandi all year, and it’s worked like a charm. Despite failing to mount a convincing case that the company is expected to realize profitability, or that 35 percent of its web traffic is from paid clickers in India (and thus largely irrelevant), the company has consistently drawn in large sums of investor cash, all while hinting that good times lay ahead – until buyers cash out, that is.
May 22’s PR cheerleading from Stock Media Group was a master class in positive spin, touting the company’s “dramatic 70 percent improvement in losses.” Of course, this fails to mention that this is in reference to LiveDeal’s May 20 earnings report, which showed the company lost ($0.07) a share, which was actually 40 percent worse than analysts’ estimates of ($0.05) a share.
Stock Media Group maintains they are not compensated by LiveDeal – directly, that is. In their disclaimer, Stock Media Group reminds readers that their news reports are opinion and that they are “compensated for LiveDeal content by a third party who reserves the right to buy, sell or remain neutral on securities after the publication of this article.” That is, they don’t profit directly off of the pump. But rather, what likely happens is that a subsidiary buys and sells LiveDeal stock in tandem with Stock Media Group's reports, profits off of the resulting pops, and then pays Stock Media Group a portion of the take. It's indirect, but a kickback all the same.
LiveDeal has made many speculators rich, but its rise is not tied to fundamentals or even impressive tech with potential. Rather, the stock’s rise is almost certainly attributable to aggressive radio advertising and spin dressed up as Marketwatch and Wall Street Journal articles.
LiveDeal popped over 100 percent before settling down slightly, and by 1:30 PM EST had gained 97.98 percent to hit $4.71 a share, on nearly 25 times normal volume.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer