Kranti Resources Inc. is yet another of hundreds of U.S. penny stock promotions manufactured in Vancouver and mercilessly flogged to naive investors in the United States and beyond.
When Kranti went public on the OTC Bulletin Board in the United States in 2007, its principal asset was an option to explore a B.C. mining property. Purchase price was $20,000 down, with further instalments to be paid over time.
By all appearances, Kranti was not an earnest exploration venture. The company's then-president, Ben Gill, was a former mutual fund salesman and owner/operator of Canam Currency Exchange Ltd. He had no experience or training in exploration. He ran both Kranti and Canam from the same office in Surrey.
Marvin Mitchell, a Vancouver geologist who has often lent his name to properties of dubious merit, recommended a modest work program, but the company quickly ran out of money and was unable to make further payments on its property.
In May, with only $53 in the bank, the company did an abrupt U-turn. Gill and his fellow directors stepped down and were replaced by Japanese clothing retailer and marketer Mitsuo Kojima.
Kojima announced the company would acquire a Hong Kong-based company, Horiyoshi the Third Ltd., which manufactures and distributes clothing "based upon the artwork for famed tattoo artist Yoshihito Nakan-Horiyoshi III."
Horiyoshi the Third is controlled by Steve Suk, a Vancouver-area resident who sports a full body tattoo scribed by the great master himself. When Kranti acquired the company, Suk became the largest beneficial shareholder of Kranti, which he renamed Horiyoshi Worldwide Inc.
The clothing line has received favour-able reviews in major publications:
"Mention Mr. Horiyoshi's name to tattoo enthusiasts and they will describe the 64-year-old Japanese master as a legend," said the New York Times.
"Mr. Suk's brain wave was to put the artist's designs, which include tigers, dragons, snakes, rabbits, samurai, bamboos and the best-selling phoenixes, onto T-shirts, sweaters, cardigans, hoodies, ponchos and scarves for women and men."
The Los Angeles Times was a little more skeptical: "Will the American consumers have the intestinal fortitude to open their collective wallets for $160 tattooed T-shirts and $950 inked-up outerwear?" it wondered.
The Vancouver lawyer who helped Kranti usher this new business onto the public market was William L. Macdonald who, as we have noted in several previous columns, has done work for many dubious bulletin board promoters who have gone on to conduct blatant pump-and-dump stock schemes.
Horiyoshi was no different, except that it was more blatant than usual. The stock was pumped by a slough of Internet stock tout services, most notably Eric Dickson, editor of Breakaway Stocks newsletter.
"Shares In This Company Could Explode By 4,538% Before Spring of 2011!" he screamed in his newsletter.
"Big A-list celebrities like Johnny Depp, Angelina Jolie and Brad Pitt to some of the biggest names in music like Gwen Stefani, Mick Jagger and The Black-Eyed Peas have all been seen wearing the exclusive apparel of Horiyoshi the III ..."
"Don't let another moment pass by without either calling your broker or logging on to your online trading account and getting into HHWW now, before news of their highly anticipated new street wear line hits the wires."
Dickson claimed that Horiyoshi had "a track record of success," but this is certainly not reflected in the company's financial statements. During the six months ending June 30, the company generated only $153,087 in sales and lost $135,242.
The disclaimer at the bottom of Dickson's newsletter reveals that it is part of a massive promotional campaign managed by Capital Financial Media, which routinely pumps penny stocks that have the shelf life of a banana.
In this case, a private company called Lux Media Corp. paid CFM a whopping $2.75 million, of which $3,000 was paid to Dickson's newsletter. This is the most expensive penny stock promotional campaign I have ever encountered.
Who owns Lux Media was not disclosed, but it may well be somebody close to the insiders. Certainly, the company has not taken any steps to repudiate these outlandish claims.
The campaign has had the desired result, of course. Horiyoshi's stock soared from five cents in October to a high of $3.14 on Dec. 14, giving the company a total stock market value of $190 million. Volume was heavy. One day, nearly 17 million shares changed hands. (The stock has since dropped to $1.74.)
People connected to this company are not talking. Gill, who organized Kranti, refused to tell me who introduced the company to the clothing deal. Suk didn't respond to several interview requests I made through the company and its public relations firm. And Macdonald has made it clear that he will not talk about his clients, due to confidentiality rules. If history repeats itself, the fervour for this stock will soon die, the stock will crumble, public investors will be holding worthless paper, and another made-in-Vancouver stock market fiasco will have passed unimpeded through the kid-glove gauntlet of our securities regulators.
dbaines@vancouversun.com Read David Baines' blog at www.vancouversun.com/baines