What a day for Pinetree – is Mega next?

by JDH on December 4, 2006

What a day for Pinetree. The day started innocently enough, with PNP.TO up a bit – then, disaster. A press release issued by the company indicated that they were not proceeding with the public offering previously announced on November 17, and even worse:The Company also announces that it has been advised by staff of the Ontario Securities Commission that it and Sheldon Inwentash, who is its Chairman and Chief Executive Officer, are the subjects of investigations involving manipulative trading in securities of Treat Systems Inc. (“Treat”) and Brownstone Ventures Inc. (“Brownstone”) and insider trading. The Company and certain of its principals are controlling shareholders of Treat and Brownstone. There have been no allegations and these investigations were not anticipated by either Mr. Inwentash or the Company.

Oops. The shares of Pinetree immediately tanked, falling from around $14.50 all the way down to $11.70 shortly before 11:00 am, and the shares remained in a trading range up to around $12.50 until just before 1:00 pm. It appeared that a massive decline had occurred.

Then, even more amazing, the stock began it’s ascent, fueled, it would appear, by James Dines of The Dines Letter (see link at right). I’m a long-time subscriber to The Dines Letter, and in his 20th Interim Warning Bulletin of the year Mr. Dines advised subscribers to “back up the truck”, since this was a great buying opportunity for investors in Pinetree.

The message was sent around 1:00 pm, which is exactly when the uptrend began, carrying the stock all the way up to a high for the day of $16.50 before 2:00 pm. Pinetree eventually closed for the day at $16.10, up over 4% on the day.


What does this mean?

First, it means that in thinly traded stocks, Mr. Dines can move the market.

Second, it means that when bad news hits, the markets may over-react, so don’t get fooled. Take your time to make an informed decision.

Third, without judging Mr. Inwentash on his guilt or innocence, the fact that the Chairman of Pinetree is being investigated by the OSC does not change the amount of uranium in the ground; if the company was worth around $16 per share on Friday, it is probably still worth around $16 per share on Monday.

I still rate the stock as a buy, and look forward to more action on Tuesday.

My final thought: Pinetree and Mega Uranium were both down sharply; Mr. Dines recommended Pinetree and it recovered; Mega didn’t; it closed down over 9% on the day (although it was as low as $4.54, and closed at $5.10, so the damage could have been a lot worse).

Frankly, Mega looks like a great buy at these prices. I wonder if that’s what Mr. Dines will recommend in his newsletter on Tuesday?

{ 0 comments… add one now }