Who is paying Beacon for the BioSolar 'research' anyway?

Posted Jan 21st 2008 1:10PM by Zac Bissonnette
Filed under: SEC Filings, Press Releases, Scandals

After we pointed out Bloomberg's failure to mention that an analyst quoted in a piece had been paid by the firm he expressed bullishness on, Bloomberg corrected the piece, adding that "Beacon said in a statement distributed Jan. 10 by PR Newswire that it was compensated $15,000 and 100,000 restricted shares by a third party for enrollment of BioSolar in a research program, without giving more specific information. Earlier today, BloggingStocks.com reported the payment."

But here's where it gets confusing. In the January 9th press release, Beacon disclosed that:

"Beacon Equity Research has been compensated a total of fifteen thousand dollars and one hundred thousand restricted rule 144 shares from a non-controlling third party for enrollment of BSRC in this research program." (emphasis added)

But in a press release dated January 3rd, Beacon disclosed that:

"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." (emphasis added)

Hmm... The client changed from the issuer to a third party in less than 10 days! Which disclosure are we to believe?

Given that a non-controlling third party generally can't issue restricted rule 144 shares, it seems pretty clear that Beacon was paid by BioSolar for the "research report."

This might seem like an arcane and academic distinction, but it isn't. If a third party is paying for research reports to promote the stock, it means that a third party is using its own resources to promote the stock for its own reasons. But if the company itself is paying a firm like Beacon for research, it means that the management is using shareholder capital to promote the stock for its own reasons. One raises questions about the scruples and motivations of an outside shareholder. The other raises questions about the issuer itself. The difference is night and day.

The larger point here is that a penny stock that is paying for stock promotion even though it hasn't generated any revenue probably didn't merit a story in an outlet as distinguished as Bloomberg.

Tags: BioSolar, Bloomberg, BSRC