The Ramp/Deramp Circus

I'm (thankfully) a passive observer to the whole Cloudtag embroilment and my thoughts are with the genuine PIs who have lost their entire holding.

And yes, I know some are still holding out hope, but the company's cash needs coupled with the fact there isn't already product on the shelves (launch costs, inventory, distribution, S&M, etc) means there is more hope of Tom Winnifrith becoming Prime Minister than there is of Cloudtag investors getting anything more than fractions of a penny for their shares from shorters looking to close the book in advance of the inevitable, that may drag on for months...

Speaking of Mr Winnifrith, he's a man I'm warming to in my ageing mind - I listened to one of his podcasts for the first time in 5 years and it was that very podcast that gave rise to this little blog of mine.

One of Tom's words of advice for avoiding the next Cloudtag was to listen to the bears on the BBs, instead of dismissing them out of hand as "de-rampers" etc.

Well, that's all very well and good, Tom - and yes, it's worrying that sites like London South East somehow managed to silence a couple of prominent Cloudtag bears whilst leaving many of the rampers to roam free.

But those sage words of advice don't on their own help private investors interpret the melee of your average share BB.

I had a similar experience to Cloudtag of my own last year - I was invested in Teathers Financial Services; not to a great extent, this being AIM and all, but I genuinely thought the Teathers App had a place (excuse the pun) in the market and would lead to more placings (yes, yes, I'm sorry) accessible to ordinary investors.

Of course there were the red flags (but at least the company had a product I could install on my phone), and the ominous warnings from the blogosphere and BB de-rampers. But the company had approximately the mcap in cash and liquid assets, right? What could go wrong?

Well, it did... So, should I have listened to the BB bears a bit more closely? 

It's hard to pay attention to constant dismissive and negative posters on a stock without questioning their motives, for there are few if any impartial voices on share BBs - our perceptions become skewed by the profits we're all chasing.

And, whilst it's important to maintain an open mind and a rational interpretation of the facts, even the good companies on AIM (hard to believe, I know - but they are out there) suffer an attack of the de-ramps from time to time as the bear raiders try and push the price down one last notch before they start to close.

Anyone who's inhabited a share BB for more than a month will no doubt wake up one day to find a former Überbear posting positively about a share. Yes, they not only closed their short yesterday, they also went long.

So I wasn't green, far from it. On Teathers I was determined to stand my ground - I didn't want to sell out at a loss only to see the share put on 30% the very next day. (Happens with surprising frequency, especially if one listens to the derampers...)

The negative voices being all so bitter and determined it was easy to dismiss them as disgruntled losers or nutjobs - maybe even had an axe to grind against the company or BOD.

Whilst none of the Teathers derampers admitted to having shorts I strongly suspected those that I didn't have down as nutjobs were just trying their luck with a short or swing trade. (The lack of a reliable short interest tracker on AIM is a huge problem for investors, but that's a post for another day.)

Turned out the shorters/de-rampers were right on that one. But there have been many shares since where they were wrong.

My conclusion then, as it is now: there is no substitute for research - read every RNS, every press article. Phone the company up - just to check someone is answering. If they have product then buy it. Check the BOD has a record of delivering promises made in past RNSs.

And whilst it is fairly easy to spot the outright agenda-posters, the rampers and the de-rampers, the grudge-holders and the nutjobs; you can't learn anything from them without first having a good understanding of the company fundamentals, a strong feel for the prospects and some idea of an approximate fair valuation.

Only once you've worked out a realistic price range for the company do the ramps and the de-ramps become useful as an early warning system - mainly against possible pump & dump or short & distort scams - but, from time to time, an alert that the company might not be as healthy as your own research had indicated.