Update: Bloomberg was alerted that the analyst was paid to deliver this report, and has added the details of the payment in its news service item.
While Michael Bloomberg is busy mulling a possible Presidential bid, he may want to devote a few minutes to monitoring the garbage coming out of his company's newsroom.
Bloomberg's Kelly Riddell reported on BioSolar, a tiny bulletin board stock that "expects its first product to generate about $100 million in sales in 2010," Chief Executive Officer David Lee said.
Nine figure revenue projections are pretty ambitious for a company that has reported literally no revenue since its inception and has spent precious little on research and development. In its most recent quarter, the company reported R&D expenditures of just over $50,000 and marketing expenses of more than $29,000-- an impressive sum for a company that has never sold anything.
What exactly is the marketing money being spent on? Back to the Bloomberg piece:
The company may earn $6.3 million this year on initial sales of its backsheets, Victor Sula, an analyst at Beacon Equity Research in Frisco, Texas, said.
``Because of silicon supply constraints, companies developing technologies for replacing silicon in solar cell manufacturing are trading at premium valuation multiples,'' Sula wrote. He rates BioSolar a ``speculative buy'' with a target price of $1.37.
What Bloomberg doesn't mention -- but should -- is this little disclosure that sits at the bottom of Sula's report on the company:
"Beacon Equity Research and its affiliates have been directly compensated a total of fifteen thousand dollars and one hundred thousand restricted rule 144 shs directly from the company for enrollment of BSRC in this research program and other marketing services ."
In a recent post, I discussed the troubling track record of Beacon Equity Research's stock picks, and Kevin Kelly pointed out serious red flags at BioSolar. We have contacted the reporter for a response and will include it if we get one.
It's a shame that a reputable news organization like Bloomberg is playing a role in pumping BioSolar and hopefully the newsroom's editors will take a hard look at the quality of the reporting on the piece. In the meantime investors should, as always, proceed with caution.