A stock-touting email calls Medient Studios and its $90 million project near Savannah a "can't miss" for investors, thanks in large part to generous state film incentives.
Medient Chairman and CEO Manu Kumaran, it says, is a "movie magician (who) turns movie bombs into movie gold for early investors." It says he'll have help from key "partners": the state of Georgia and Effingham County. It calls Kumaran a "conservative" filmmaker who will school Hollywood.
The email and a supporting report comes from a company paid with 225,000 Medient shares by a Medient shareholder, who would stand to profit if more people buy the stock.
A small print disclaimer discloses the arrangement, but it's a controversial practice in the turbulent world of volatile, over-the-counter penny stocks.
Medient shares had jumped from 40 cents to more than a $1 in late March, when the Savannah project was announced, but had fallen back to 19 cents by May 6.
The marketing email was issued May 9 and included news of a preliminary partnership with a production company that had been announced two days earlier. Shares immediately shot up to 84 cents. They traded Friday at about 80 cents.
The company that sent the email and did the report, NBT Equities Research, touts Medient's plan to produce low-cost, high-quality films while using state incentives to build profits.
But Medient's financial disclosures say the company has no cash on hand and is not profitable, while an auditor raised doubts about its ability to stay afloat.
Bill Guttentag, a filmmaker and Stanford University business professor, said most states have film tax credits, so that advantage is not unusual.
"Anyone who tells you that you can't lose money in film is not telling you the truth," Guttentag said.
The email carried the name Tobin Smith, listed as founder and editor-in-chief of NBT. Smith regularly appears on the Fox News business program "Bulls & Bears." Attempts to contact Smith were unsuccessful.
Kumaran said a shareholder not aligned to management hired NBT to pitch the stock.
"I don't know a lot about it," he said of the practice. "But I do realize that if you are in a very crowded marketplace you need people talking about you."
The disclaimer on the email said NBT "has not determined if the statements and opinions of the advertiser are accurate, correct or truthful," and not to rely on the statements to make investment decisions. The firm has been paid to promote other penny stocks, according to disclosures on its website.
Brink Dickerson, a securities attorney at the Atlanta law firm Troutman Sanders, said he tells clients to "run, not walk away from" a company whose only apparent investor research is work that company or its shareholders paid for.
