An Alleged Pump-and-Dump Company and its Natural Sweetener, Part II

A couple weeks ago, I mentioned a company NXT Nutritionals which sells a supposed natural sweetener called Susta.  I mentioned how I had made some money trading this company's stock.  I also described the nature of "pump-and-dump" stocks and how you can identify them.

So what does this have to do with NXT Nutritionals?

Let's compare the characteristics of NXT Nutritionals (which goes by the ticker symbol NXTH) to the known characteristics of "pump-and-dump" companies that I described in my previous post.

First, I mentioned how pump-and-dump companies often promote their stock through hard mailers or email spam, making claims that the stock is going to increase 100 - 500%.  Here is an example of a promotional mailer for NXTH:

See how the mailer claims you'll get a 275% gain?  Also read the fine print.  The stock promoter doing the mailer received $320,000 from a company that itself received the money from NXTH shareholders.  In other words, NXTH insiders were paying to have the stock promoted.  Can you guess what NXTH insiders were doing with their stock as the stock price rose as the result of the mailers?

As I mentioned in the last post, insiders will accumulate large numbers of shares at a very low price, and then sell into the "pumping" as the stock price rises.  Well, numerous NXTH insiders held millions of shares at very low prices.  Even celebrities got into the act; Shaquille O'Neal received 1 million shares of the stock in exchange for lending his name to the company (and that's not the first time Shaq has been associated with sketchy companies...read here about his association with Znetix which was charged by the SEC for cheating investors out of $100 million).  Charles Payne of Faux News (err, I mean Fox News) was paid $50,000 to promote NXTH, and the SEC has fined Payne $400,000 in the past for fraudulent penny stock promotion.

Another characteristic of a pump-and-dump is the appearance of the stock chart.  In my previous post, I showed you the stock chart for MSEH (which ironically has also been promoted in the past by Charles Payne):

The stock chart for Mesa Energy Holdings (MSEH), a stock involved in an alleged pump-and-dump scheme from January to April. The days circled in blue represent the "pump", where the stock price is slowly controlled and manipulated up. Investors buy into the pumping, and the insiders are selling their shares. The days circled in red are the "dump" phases. There is nothing holding the stock price up, so it falls rapidly, losing 30-50% of its value within a few days.

Now, let's look at the chart for NXTH:

See the similarity between the charts?

This is just some of the evidence that makes NXTH look awfully similar to known pump-and-dump schemes.  For more, read this blog post by Timothy Sykes.

Well, enough about the company itself.  In my next blog post of this series, I will discuss its sweetener, Susta.