New book by Larry Connors Click here Improve your trading - See how
Since 2007, Fitzpatrick has characterized the current business cycle of Pre-Paid Legal Services Inc. (NYSE:PPD) based on published data, as "pyramid in collapse." The second quarter of 2009 data adds to this portrait and further confirms this status.
All key indicators for the second quarter compared to the same period one year ago show significant and continuing declines:
. Recruiting of salespeople (called Associates), which is the engine of the entire business model, were down nearly 4% from the same period last year.
. The total number of Associates is not reported quarterly but only at the end of each calendar year. At the end of 2008, Pre-Paid Legal Services claimed a total of 425,018 Associates which represented a 4% decline from 2007.
. Recruitment of Associates for the first two quarters of 2009 is down over 23 percent from the same period last year. Recruitment of new Associates for all of 2008 was down 18 percent from 2007.
. The number of new members (retail customers) dropped 9% from the same period last year and the Q-2 of a year ago was down 4% from the previous quarter. The total number of memberships is down 4% from a year ago. Total new memberships sold in all of 2008 was down 10% from the year before.
Declines Stand Out in Business Sector:
Though the recession has damaged sales of many companies, Pre-Paid Legal Services's accelerating declines stand out within its business sector of "direct selling." Pre-Paid's steep decline conflicts with the trends of large companies also in direct selling.
According to a May 15, 2009, article in USA Today, "Direct-sales businesses that rely on home-based representatives to peddle their wares are seeing their sales forces rapidly expand as the nation's unemployment rate soars ..." The president of the Direct Selling Association, of which Pre-Paid Legal Services is a member, stated, "Unfortunately as the unemployment rate rises to 10 percent or higher, we'll be picking up more people ..." An Avon official told the newspaper, "Right now, our direct-selling opportunity is really the No. 1 product that we have to sell." In fact, Avon reports that its U.S. sales force is now the largest in its history.
Insider Sell-offs:
Not only has Pre-Paid Legal Services shown definitive signs of irreversible market deterioration, but the maneuvers of its top officials also reveal classic pre-collapse patterns. In the midst of continuing and accelerating sales force and customer drop-offs, insiders have used company funds to buy up stock, driving up the share price artificially, and then have sold off many of their own personal shares at the high prices.
In its latest disclosures, Pre-Paid Legal Services announced that the company used $524,824 of revenue during the second quarter to repurchase 13,315 shares of common stock at an average per share price of $39.42. In this same quarter, company CEO Harland Stonecipher sold personal shares equivalent of 23 percent of this total. The buy-back/sell-off price was approximately 50 percent above the year's low trading price.
Despite dismal numbers, Pre-Paid Legal Services's stock price was artificially pushed upward with the company's re-purchases while critical recruitment of its sales force dropped 22 percent and enrollment of new customers dropped 9 percent over a year before.
According to Barry Minkow, co-founder of the Fraud Discovery Institute Inc., "Posterity will one day marvel at the incredible credulity Wall Street possessed and currently possesses by allowing a literal financial crime in progress to seemingly prosper in stock price in the face of every red flag for fraud - a collapsing company built on an endless chain, 'doomed by design' business model."
View the Fraud Discovery Institute Inc. reports at PonziPlusPyramidEqualsPrepaid.com (http://www.ponzipluspyramidequalsprepaid.com).
HTML: http://www.eworldwire.com/pressreleases/19655
PDF: http://www.eworldwire.com/pdf/19655.pdf
ONLINE NEWSROOM: http://www.eworldwire.com/newsroom/312116
RSS NEWSROOM: http://newsroom.eworldwire.com/xml/newsrooms/312116.xml
Source: Fraud Discovery Institute Inc. (FDI)
Barry Minkow FDI 9747 Businesspark Ave #218 San Diego, CA 92131 PHONE. 888-300-8307
More News:
Market Updates |
Stock Alerts |
All Trading News |
Stock Index
About TradingMarkets | Contact | Advertise | Careers | Link to Us | Site Map | Help | Terms & Conditions | Privacy Policy | Return Policy | Testimonials | Feedback
The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.
The Connors Group, Inc.
10 Exchange Place, Suite 1800
Jersey City, NJ 07302
© Copyright 2009 The Connors Group, Inc.
