A Caution to Traders in Propanc (PPCH)

We like to caution technology investors against investing in over-the-counter (OTC) companies because a majority of the time you will lose your money in the long run. Speculators can make money but investors will almost always be left holding the bag. We don’t write about OTC companies because we have financial incentives to do so. We do this because we’ve seen too many well-intentioned investors lose their hard-earned money in such firms while this capital could have put to much better use in investing in the real technology opportunities that will benefit society, instead of creating a lucrative way for incompetent executives to make a living.

Sometimes when investigating OTC companies, you will find questionable relationships with 3rd parties that immediately raise some red flags. Let’s take Propanc (OTCMKTS:PPCH) as an example. Propanc is a $30 million market cap, OTC company which is developing a proenzyme therapy, which they are currently testing on animals. They have $168,348 in cash on hand per their last filing. The stock price is up +100% in the past month and here’s why.

SeeThruEquity

A firm called SeeThruEquity recently initiated coverage on Propanc with a 12-month price target of $1.52 per share comparing this small company to all 3 firms we highlighted in an article we published titled “3 Ways to Invest in Cancer Stem Cells (CSCs)”. When the SeeThruEquity report was first published, the stock price was just 0.0445 cents. What sort of research firm sets a price target that is +3,300% higher than the current price? When the market closed the day after the report was published, PPCH was trading at .084 cents for a gain of +89% in a single day. SeeThruEquity claims to be “the first truly independent research provider in the capital markets” which is “committed to providing unbiased research for companies under $1 billion in market capitalization“. However, it’s hard to see how this can be the case when you look at SeeThruEquity’s “Premier” services offering seen below:

SeeThruEquity_Premier_Offering

How “independent” and “unbiased” can you possibly be when you are receiving substantial indirect compensation for the reports you write? Unbiased enough to present a realistic price target as opposed to one that is +3,300% higher than the current price of the company you’re providing coverage on? Nevertheless, this exposure did result in a stock price increase for shareholders though we question the ethics of the method.

Maxim Group

In a recent investor presentation, Propanc state that they have engaged Maxim Group LLC as advisors to fast track their growth by helping them raise capital, pursue a listing on a national exchange, and seek out licensing partners. Founded in 2002, Maxim Group is a leading full-service investment banking, securities and wealth management firm headquartered in New York. Maxim was the bookrunner for the recent IPO of Opgen. While Maxim is a member of FINRA, it doesn’t seem like they read the rule book very often. Checking with the Financial Industry Regulatory Authority (FINRA) we see more violations than we have time to read going as far back as 2002 when they were founded until the present. While we didn’t have time to go through all of these violations, there were a few that were very concerning for retail investors such as this one:

Maxim_2002

That violation resulted in a fine of just $15,000. Given that this was over 13 years ago, was this deterrent effective in preventing this unethical behavior? It wasn’t. Over ten years later, we see still see more of the same violations:

Maxim_2013

Clearly these token fines aren’t a deterrent to Maxim as it seems like they have no intention of correcting this behavior. The fact that Maxim is now helping Propanc “fast track their growth” doesn’t instill much confidence in how those limit trades speculators might be placing in PPCH are being handled. One thing for sure is that placing market orders for PPCH should be clearly out of the question.

While speculators should proceed with caution, investors can take two paths at this point. They can either continue researching Propanc as a viable investment to make in cancer stem cells or take that capital and invest an equal amount in 3 companies that are pure plays and trade on a major exchange; Oncomed Pharmaceuticals, Stemline Therapeutics, and Verastem.

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