We have a new short pick for our Short-the-Spammers portfolio. The company is called Global Warming Solutions, Inc. (OTC:GWSO). And while we’re all for curbing global warming, this company can’t be helping, as its “business” is just a lot of hot air, as you will see.

But first, let’s see how our first pick is shaping up. As you recall, we recommended shorting Tubearoo (OTC:TUBR) at $2.06 a share, on July 3, 2007. It’s now trading at $0.57, for a 3-month gain of 72%. As you can see, short-selling these hustlers can be quite a profitable venture. It’s tempting to take profits at this point, but at $.57 a share, TUBR still has a market cap of $39 million. $39 million is still quite a high price for a company that’s worth zero. So for now, we will continue to hold our short position in this stock.

Now let’s have a look at GWSO. Your editor received a multi-page full-color pamphlet touting this stock in the mail today. It bears a striking resemblance to the pamphlet we received for TUBR, right down to the lengthy legal disclaimer. Its title is the very official-sounding “Green Investor Report,” and it features a scary photo of the earth on fire. They have actually put up a Web site here, and you can download the pamphlet in PDF form. I highly recommend you do so. Read through it. Examine the breathless language. See if they can pull you in. In particular, let’s look at page 3, where they list their alleged reasons to own this stock. The headline reads: “Own this stock today. The logic is overwhelming.” Well let’s have a look at their “overwhelming” logic, and your editor’s humble response to each claim:

Supposed Reason to Buy GWSO

Response

“Evidence of global warming is undeniable.”

Even if that’s true (we won’t get into that debate here), it tells us absolutely nothing about this stock.

“Consumers and businesses both demand green solutions.”

See above. So there’s a market. How is this company serving it?

“GWSO is the only publicly listed company 100% dedicated to fighting global warming.”

Oh really? How about Ballard Power? Plug Power? Or the many other alternative energy companies out there? New ones crop up every day. Besides, even if this were true, who cares? This is meant to be an investment, not a charity donation. Show me the money.

“$51 billion industry by 2015″

Again, even if this projection is true, it tells us absolutely nothing about GWSO.

“GWSO could rise 500% or more!”

This is your editor’s personal favorite, and a time-honored ploy of stock hypesters and fraudsters. Why? Because this statement can technically be said of any stock in the entire world. No one can tell the future, so of course this stock “could” rise in value. But again, this statement tells us absolutely nothing about the company.

Are you beginning to see a pattern here? Every one of these statements may be technically “true,” but not one of them gives us any material information about GWSO at all. These statements are by all appearances deliberately designed to mislead. The only thing “overwhelming” about the logic of these arguments is its utter and complete absence.

Now to get some information we can actually use, let’s have a very close look at the legal disclaimer. Here’s a choice excerpt:

This is not an analysis of GWSO’s financial position or operations; readers are strongly advised to review GSWO’s financial information in the investors section of www.globalwarmingsolutions.com. Because GIR is a paid advertisement, there may be an implicit bias to its content. GWSO is not profitable and is an early stage company. Investing in stocks, especially early stage companies that are not profitable, is highly speculative and carries a high degree of risk; investors may lose all or part of their investment. Penny stocks may be suitable only for those who can afford to lose all of their investment capital.

As you can see, this “special report” is a paid advertisement, and by its own admission does not analyze the company’s business operations. We’ll have to do that ourselves.

To that end, we paid a visit to the official Global Warming Solutions Web site. We were impressed by the lovely graphics and flashy interface. However, we were not nearly so impressed when we downloaded and read the company’s SEC filings. Here’s a quick breakdown:

  • Assets:$741,046
  • Cash:$229,096
  • Total Revenues:0
  • Cash Flow:(302,904)
  • Shares Outstanding:62 million
  • Market Cap:$65 million
  • Shareholder Equity:$741,046

So the company, according to its own estimation, is worth $741,046. That includes a $500,000 valuation for a “hybrid engine” it claims to have. Let’s assume for the moment that that’s correct. That means its stock’s current “value” is $.012 per share. At today’s price of $1.05, it’s trading for 88-times its value.

In truth, even that valuation is generous, because at its present cash burn rate, the company will be broke in a few months. Its real value, in your editor’s opinion, is zero. They have no revenues, and no credible plan in place to generate revenues. Just like the smoggy skies over Houston, it’s all hot air.

Action to take: Sell GWSO short at today’s price of $1.05 a share. It’s already down over 50% from its highs, but it has a long way down to go.

Short-the-Spammers Portfolio

Stock

Rec. Date

Reference Price

Recent Price

P/L

Action

OTC:TUBR (short)

7/3/07

$2.06

$.57

72%

Hold

OTC:GWSO (short)

10/3/07

$1.05

New

New

Sell Short

Until next time, good investing, and pay heed to spammers at your peril!