The SEC is our Friend....

Global Links Corp (BB: GBLL)

By: janeane_garofalotx
29 Aug 2005, 10:30 AM EDT
Msg. 13797 of 13813
Jump to msg. #

Naked Truth Dressed to Baffle

By Kevin Kelleher
TheStreet.com Senior Writer
8/29/2005 9:07 AM EDT
Click here for more stories by Kevin Kelleher

In early February 2005, something truly bizarre happened to the shares of Global Links (GLKC:OTC - commentary - research - Cramer's Take) that thrust an unknown, pink-sheet stock into the center of a heated debate over naked short-selling.

It all started when the company completed a 350-to-1 reverse stock split -- an unusual step in itself, but one that paled alongside what came next. With 5.43 million shares outstanding and a float of 1.15 million shares, Global Links saw trading volume of 143.5 million shares in the first four sessions of February, driving the stock as low as 8/100ths of a penny.
"What happened the first week of February 2005 really took us by surprise," Frank Dobrucki, Global Links' CEO, wrote in a letter to shareholders. "It became very clear that we had no control of the volume or price of our stock in any way. Outside forces were now manipulating our stock." (Dobrucki didn't respond to requests for an interview.)

Later that month, a Michigan investor named Robert Simpson paid a cool $5,205 for 1.15 million shares of Global Links -- equal to 100% of the float. Yet, strangely, shares were still available for trading. Two weeks later, an Oregon investor bought another 180,000 shares, not in hopes of making a profit, but simply to make a point: "It would appear that my securities purchases prove that Regulation SHO has been systematically violated by market-making brokers and securities-clearing firms," Paul Floto, the investor, declared in his unorthodox filing with the Securities and Exchange Commission.

"I had a number of other stockholders call me and tell me they owned lots of shares as well," Floto said in an interview.

In March, Global Links became the poster child for those asserting that naked short-selling is out of control. During a Senate Banking Committee meeting, Utah Sen. Robert Bennett used the company's extraordinary trading data to browbeat SEC Chairman William Donaldson.