[NB: The following is a re-up of thoughts, from 2018, on Vancouver BC’s own Harmel Rayat, a noted serial Reg S player, no stranger to the regulators. Given the recent hype around his most successful stock promotion, Solarwindow (WNDW), we thought we should revisit it. Our beliefs remain the same, like all Harmel Rayat deals Solarwindow is pure junk. Past is prologue, pedigree counts.]
Back in the 90s and early 00s a very common con was the “Reg S” scam. Using an exemption from the registration requirements companies could sell stock with virtually no disclosure, nor oversight. The catch, the shares could only be sold to non-US persons or institutions. Americans were forbidden to purchase Reg S stock.
Boiler rooms would buy huge blocks of Reg S stock at massive discounts from the trading price of the shares on the open market. Then, some of the stock would be spread around to various nefarious stock promoters to create demand and volume.
The boiler rooms would then furiously call foreigners offering them shares of hot “US-listed” company X. Even better, the call scripts would read, is that these shares are available at a discount, but only if you buy now.
As a hypothetical example, the boiler room baddies buy stock from a company, or from insiders, at $1, while the shares were actually trading at $4, and would offer them to the suckers at $3, pocketing the $2 “rip“.
But what’s the harm, you ask? The buyer still got a share of stock at $3, and the market price is $4 How can he lose?