Pump and Dump 101: Increase your total outstanding shares from 100 million to 550 million. When most company’s announce a move like that, the share price immediately retreats from any recent gains. However, LuxeYard Inc (OTC: LUXR) is different since the share price of its hot penny stock hit a new high of $1.78 two days after that announcement.
LUXR has been slowly creeping through the spoilage Sunpeaks Ventures has left to gain 81 cents, 84%, since we issued our alert on the penny stock on April 17th (see here). Don’t expect to see a 10-Q or 10-K from LuxeYard any time soon since they conveniently moved to the Pinksheets since the penny stock debuted last month. Pinksheets companies can file with the SEC if they choose to, but are not required.
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LUXR Stock Chart:
Market Cap: 107.59M
Operating Margin (ttm): -50,954.24%
(May 4, 2012): 1.78
(Mar 13, 2012): 0.47
Avg Vol (10 day): 1,612,390
Shares Outstanding: 63.29M
LuxeYard trumped their share expansion 8-K with an announcement on Thursday to expand its eCommerce offerings by including one-of-a-kind and limited editions of fine art, photography and sculpture from collections around the world. The Company says the LuxeYard community will serve as curators of the one-of-a-kind and limited edition pieces, suggesting which artists should be featured on the site by way of the pieces they “like,” “follow” and comment upon. LuxeYard members can also upload photos of the pieces they want its art buying team to source.
Basically sounds like what would happen if eBay and Facebook had a baby using Frogads as the surrogate and named it “LUXR‘.
Braden Richter, CEO of LuxeYard, said he envisions the Company acting as a unique gallery space for the artist, collectors and consumers wanting to give exposure to established and emerging artists alike. It’s not a move you would expect a company that considers itself as luxury oriented eCommerce site focused on the liquidation of high end goods in bulk quantities. LUXR sold its image as a start-up as a company that secured high end goods like furniture and apparel in large enough quantities for both ends to have a need; customers to purchase them and manufacturers to sell them.
Note: Ever heard the phrase “starving artist“?
Alert: In an 8-K LuxeYard filed on April 27th;
Pursuant to a private placement memorandum, Luxeyard, Inc. (the “Company” or “we”), closed a financing on April 24, 2012, by entering into certain Debenture Purchase Agreements (the “Purchase Agreement”) with certain investors (the “Holder” or “Holders”) whereby we issued and sold to the Holders certain 10% Convertible Debentures which are convertible into shares of our common stock (collectively, the “Notes”), $0.001 par value per share (the “Shares”), at a conversion price of $0.30 per share, subject to adjustment.
The aggregate original principal amount of all Notes is $2,990,000. Based on the aggregate original principal amount sold by the Company, the maximum Shares we may be required to issue is 9,966,667.
The terms of the Notes are as follows:
• (i) the maturity date is two (2) years from the date of issuance (the “Maturity Date”);
• (ii) interest on the outstanding principal balance shall accrue at the rate of ten percent (10%) per annum;
• (iii) the interest shall be compounded annually and added to the principal amount of the Notes and, at the option of the Holders, either available for conversion into Shares or due and payable together with any unconverted or unpaid principal amount on the Maturity Date:
• (iv) there is mandatory conversion of the Notes to Shares if at any time, prior to the Maturity Date,
• (a) the shares of Common Stock underlying the Notes are registered in a registration statement under the Securities Act or the shares of Common Stock underlying the Notes are available for resale pursuant to Rule 144 or similar rule, without limitation;
• (b) for a period of ten (10) consecutive trading days the closing bid price for the Shares remains at or above $1.00; and
• (c) the daily volume of the Shares during such consecutive ten (10) day period is at least 50,000 shares per day.
So, IF LUXR close at, or above, $1.00 for 10 consecutive trading sessions and during that time, volume is above 50,000 per trading session, certain investors can convert the $2.9 million notes to 9,966,667 shares for $0.30 and trade them in the open market without limitation IF LuxeYard or the FINRA registered broker-dealer register the shares. Now does it make sense why the common stock was increased from 100 million to 550 million?
With the current price of $1.70, less the conversion cost of $0.30 per share, would be a $1.40 profit per share. Multiply that by 9,966,667 = $13,953,333.80 before broker and registration fees so, lets just call it $13.5 million.
LuxeYard Inc. is a member-based online marketplace for luxury home and other consumer related products whereby we are sourcing products from merchants and are offering those products at deep discounts to retail prices to the members to our website via a “flash sale” or “daily deal”. Initially, the Company focused on household furnishings and goods such as furniture, accessories and bedding. the Company expects to expand their offerings to include other consumer goods such as food and drinks, services and events, and gift cards.
Bottom Line: Said it before, nothing wrong with making money on a “pump and dump” as long as you don’t get greedy. SNPK was a classic recent example how we pulled the trigger well in advance of the top but completely avoided any of the bottle neck congestion of trades attempting to get filled on stop loss orders.
LUXR should already be on your list of penny stocks to watch. The current level seems a bit high for a speculative entry yet the recently filed 8-K expanding the total number of outstanding shares to 500 million from 100 million with an additional 50 million “blank check” shares for issuance may be an indicator that this pump is still in its development stage.