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Who Wants To Be A Penny Stock Millionaire?
Want to be a millionaire? That’s easy. All you need to do is find a failing company whose shares trade with some semblance of liquidity, offer to loan said company money, then make sure the fine print on the deal allows you to convert the note into equity at a guaranteed discount to where the stock trades.
You literally can’t lose unless of course you can’t find any buyers, but if the five or so people you hired to scout prospects did their job and chose companies whose shares actually trade, that shouldn’t be a problem.
That, apparently, is how one Joshua Sason has managed to make a fortune in penny stocks and while it’s not technically illegal, it most assuredly raises eyebrows. Here’s more, via Bloomberg:
What Sason discovered is a way to get shares in desperate and broke companies at big discounts by lending them money. Magna has done deals with at least 80 companies. Of those, the stocks of 71 have gone down since the investment. He can still turn a profit, because the terms of the deals allow him to turn debt into equity at a fixed discount. No matter where the stock is trading, he gets it for less.
Magna functions as a pawnshop for penny stocks—shares of obscure ventures that change hands far from the rules of the New York Stock Exchange. His customers have included a would-be Chilean copper miner, an inventor of thought-controlled phones, and at least two executives later busted for fraud. They come to Sason to trade a lot of their stock for a little bit of money. Often they’re aware the deal is likely to be bad for their shareholders.
If the share price goes lower before Magna can unload its investment, the companies have to give up even more stock, all but eliminating the risk for Sason. Critics call it “death-spiral financing” because it drives stocks into the ground. Others in the field say they sometimes make double, triple, or even 10 times their investment in just a few months.
The business is legal, but the loopholes in securities law it exploits are too sketchy for most of the Ivy League types at banks and hedge funds.
Too sketchy for Ivy League types at banks? That’s when you know something is wrong.
Here are the gruesome details of what happened to the next Skype when, down to his last $100,000 and burning through at least that much every 45 days, the company's owner turned to Sason and Magna:
Paul Riss’s deal with Magna in July 2011 was typical. The New York entrepreneur’s company, Pervasip, was developing a communications app to compete with Skype, but it was down to its last $100,000, barely enough to last a month at the rate the company was losing money. When Magna’s “Michael Goldberg” called offering cash, he didn’t even ask to look at the app, Riss says. “All they care about is the liquidity of the stock,” he says. “They want to see how many dollars are trading a month.”
On the surface, the $75,000 loan Magna offered seemed all right. It was in the form of an “8 percent convertible promissory note,” meaning it asked for an 8 percent return and gave Sason the right to convert it into stock. The fine print explained that if Pervasip didn’t pay back the money within six months, the lender could convert at a 45 percent discount to the market price. So, no matter where Pervasip’s stock was trading, the company had to give Magna shares that were worth more than $136,000—an 82 percent return in just six months. Essentially, Magna locked in a fixed return.
It would appear then, that all of those yield chasers who, in a desperate attempt to lock in anything that even approximates a respectable return, have piled into subprime ABS, consumer loan securitizations, and shale-related HY, are simply looking in all the wrong places. There are riskless triple-digit returns out there just waiting for someone to come along and collect them. Here is a blueprint to follow courtesy of Bloomberg’s art department...
Sason’s biggest win ever came when he agreed to pay for the right to collect the outstanding debts of a sinking company called Newlead. After paying some $45 million to the company’s creditors, Sason agreed to call it even if Newlead would grant Magna immediately-exercisable stock worth $62 million. Not a bad deal.
The punchline: Newlead is a Greek shipping company.
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me
Joshua is a Christian name. Not sure about Sason. Unless he's converting and wearing a yarmulke soon, he is going down. On second thought, it didn't help Madoff because he was stealing from the family.
Christian, and...
It is the 6th book of the Hebrew bible & Old Testament of the Christian Bible.
Joshua took over after Moses' Exodus
Just sayin..
Yes, Joshua (Yeshua) pre-dates Christianity.
Reg 'S' & 'D' strikes again! Been around forever!
Great idea.
I'm in, but let's cut the time from 6 months to 3 months, I'm in a hurry...
Penney stocks have always been an interesting game and I agree, that's a great idea in a pseudo-legal kind of way and he'll be cool as long as he makes sure the IRS gets their cut....
I wonder i get an advisement fee when they tell the business to do a thousand to one reverse split?
"Then everyone starts piling into it because suddenly they think they're rich...
Exactly - I'm just mad I didn't think of this first. Haters gonna hate.
In case you didn't already know this - YOU (yes, I mean you) SHOULDN'T BUY PENNY STOCKS. Unless your shoeshine guy gave you a hothothot tip, of course, because this time will be different.
Less stock and a bigger discount with a quicker but maybe scaled by time convertability would be a better play as it would lead to just as much profit without as much volume which would help maintain the price of the stock thereby allowing the company to continue to raise money instead of the grab it all and tank the stock.
Michael Milken? oh wait, that was junk bonds..
.0000000005 ? Lmao
Is this the pimpin teen again? Gotsme a BMW but no license!
Cream ain't the only thing that rises to the top.
pods
His older cousin.
End the stock market and this shit goes away forever. Along with the ill gotten fortunes of a few million undeserving individuals.
Win win anyway you look at it.
It is ending itself. Taking beneficial things like capital formation right down the shitter with it.
Everything is going to get a lot more local.
It will not take capital formation down with it. It will change the scale accordingly when everything becomes a lot more local.
For discussion: Is localizing a good or bad thing?
My say: It is a good thing. We have reached or surpassed peak carrying capacity and certainly passed peak complexity and reliance on highly vulnerable systems and technology. Localization will reduce the load to what is locally sustainable, systems will be scaled back, simplified, and become more resilient and reliable.
The resistance to this state of affairs will be disasterous. Large segments of the global population are reliant on the, among other things, resources, products, and generousity of far away places. There are factions who use these these reliances to benefit themselves and manipulate others. That right there is two groups who will fight and kill to keep this system alive. They will not be content to live and let live. They are the ones who are actually ending it (all global management, capital and otherwise, systems) with their greed and sloth and ignorance.
Don't bet on it, history is full of people who bent reality in their favor but it only really works if your first in the game....
The problem is that weird things happen when reality bends back...and it will.
Great idea! Why don't we just outlaw loaning at interest and currency at the same time? We can just go back to trading shiny pebbles to put gas in the tank.
Do these people have any idea what the stock market is? You can't end the stock market without ending economic activity.
"Hey Jimmy, I've got a leaf-raking business that makes $25 per week - I'll sell you half the business for $1,600."
^ That's essentially all the stock market is.
Ok, I'll do this. How do I get 50 million to start with?
Start a penny stock company,
borrow money from Magna,
loan money to other penny stock companies at higher rates,
rake the spread
duh
:)
Now that's cannibalism ...... I mean capitalism!
so who is the down voting prickster? You fuck face mother fucking douche bag piece of sheeeit, how dare you down vote these cerebral posts?
Dow up 250 plus and now marc faber is saying "buy US stocks....that would be the reason for my animus above
Tsk, don't sweat the single down votes, it's the only thing some people are capable of.....
-1 lulz
Bullshit. Is this guy a thief? Definitely!
But he's small potatoes compared to what HFT takes in, and BBG will never go after them.
He's not a thief, he's just playing the loopholes.
Watch for guys like him to be paraded in an orange jumpsuit before the world when markets crash.
Markets would be fine if it wasn't for guys like this, they will say....
Scapegoat sharkbait. He better have a good escape plan with or without the money. Bubba is ready and waiting in cell 101!
Sounds like a smaller version of the guys bankrolling Radio Shack and SEARS.
This "Joshua Sason" sounds like a great guy. He gets rich by lending money to struggling companies while the people that work there most likely get fired.
Great, real great. Amerika in a nutshell.
Yeah well, all the borrower has to do is use the money to pay the help their wages, and keep the company afloat and make some profits. If the stock goes up he gets to pay the money back cheaper.
Any viable business that isn't run by an incompetent or scamster should be able to do that.
We are talking about businesses that are days or weeks from bankruptcy. Their choice is go broke today, or borrow from this guy or Guido the shark.
I bet Josh and his tribe buddies have a happy feel-good ending in mind.
According to his Linked-In profile:
Magna is a New York based investment firm that creates lasting relationships with portfolio companies across Equities, Ventures, and Entertainment.
Lasting relationships, yeah, that's the ticket.
Managing Director at Magna
Notes Hebrew as secondary language. Hoocoodanode?Allied Nevada?
These deals on the face of them don't seem so shady to me. If the company doesn't pay back the loan they give Magna shares which at face value are worth even more. But if the company could sell the shares for the face value, they would do that and pay off the loan, or avoid it entirely. I don't think even the most liquid penny stock will accomodate a $40 million sale without a big discount. Now if they are required to compensate Magna for the losses incurred after the transfer of shares then that would be BS.
Q: how do you make a small fortune in penny stocks?
Financial vulture.
How come all these thieves come from same DNA?
These facts probably are a factor:
- Average verbal IQ of a hasidic Jew is 120
- 300 years ago, most European Jews were forced into finance, as just about everything else was made illegal for them
No need for conspiracy theories when there is a simpler explanation out there.
Smartest woman I ever met was jewish.
those jewish princesses actually take the time to learn shit instead of just being pampered to like all the rest of the westernized princesses.And they teach their kids.
All while Jon and Daquan and Juan are worshipping sports, they're learning to run your ass into the ground over the course of your lifetime.
There's a reason why Jews are the most influential ethnic group: they aren't stupid.
it takes brains.
I'm trying to think of who the victims are in this scenario?
I bought one Pink Sheets stock in my life. It was a driller in the Permian Basin. Luckily I didn't put much money into it, because I quickly learned that solid balance sheets don't matter much when management basically exists to siphon money out of the company.
If an unsuspecting investor had invested in the company, this could serve as a means to drain his share of the equity.
clearly this guy is an equity stripper i think the question was more along the lines of does anybody feel sorry for people who buy penny stocks?
Or any stocks, for that matter, eh?
You are a fast learner!
Sason's only telling us about this now because it doesn't work anymore. As soon as a company takes a loan from him, its stock attracts no buyers at any price.
It's like lending a billion ounces of gold to Janet Yellen, and expecting her to print enough dollars to buy two billion ounces.
Bang. Dead in the water. Yep, if you buy shares AFTER 'Sasoon' here, you are BUYING from HIM.
Goldman job in his future! Or Sec of Treasury for Hilary's ...or both
Clearly a Fed head in the making.
"Son you gonna go far in 'merica!". Now hand this bill for a brand new " space launch thinger" to that guy over there...and then, if you live, we'll give you desk...and a chair!
With wheels on the chair!
Yes, yes...the office will be heated....
Serious Question: Can someone please explain to me how basing your company in Texas allows you to evade any criminal prosecution?
Federal court in Austin.
(don't know, just a cheap shot)
Can I interest you in a Blind Pool offering ...anyone?