At the age of 21, Joshua Sason was living in his parents house with dreams of being a rock star. He was in Long Island working a boring job for a law firm that handles debt collection. Not exactly your dream life, right?
Well, things turned into quite the dream for Joshua when a buddy of his taught him one rare but legal trick that made him a big shot millionaire with strategic penny stock market invests. It sounds like one of those advertisements you see in the sidebar of a website that you never believe, but it's actually true. For this former also-ran, trading stock online put him over the top. Penny stocks at that.
What does he know that he's not telling? A lot, obviously.
And now Joshua is living the life, he has a lingerie model girlfriend, he's hanging out with movie stars and producing a movie with Martin Scorsese, a movie that he's footing the bill for.
Joshua thinks of himself as a self-taught value investor, notoriously tight-lipped, Mr. Sason says "I’m not going to give away the details of how we do what we do,” he's satisfied with leaving it at this, “We create businesses, and we invest.”
But to be sure, his stock trading strategies are far more complex than that. Joshua found out a way to snatch up shares of companies that are on their last leg, broke and desperate for help, he gets the shares for next to nothing by lending money to them. To date, Magna has reached deals with 80 or more companies. Think he's worried about the stocks going down on these struggling companies?
Nah.... He still profits. MAJORLY.
The way that Joshua plays it, the terms of the deals still allow him to turn debt into equity at a fixed discount. In fact, stock for 71 of the companies he's done business with have dropped since his investments and he's still banking from the deals. And banking HARD.
No matter where the penny stocks are trading at, Joshua gets them for less money. Magna absolutely dominates the penny stocks trade, acting much like a pawnshop for penny stocks - shares of obscure ventures that get exchanged much differently than what happens on the NYSE.
Some of the companies he's invested in even had company execs that were later charged with fraud. Joshua gives these companies a little bit of money for a whole bunch of stock shares in their companies. The companies usually are well aware that the sell off of these shares for pennies on the dollar is bad for their shareholders, but they do it anyway.
Magna pretty much has these companies "by the balls", if the stock price drops lower before Magna can dump them, the businesses they invested in have to surrender even more stocks. Joshua's empire holds virtually no risk in the deal.
Critics have termed it "death-spiral financing" because it drives stock prices into the ground. Others in the "death-spiral finance" game say they sometimes make triple, or even up to 10 times their investment in a matter of a few months.
From the sound of it, you may think this is some illegal bull crap. You'd be mistaken.
It's actually legal, but most big-name hedge funds and Ivy League type investors choose not to get involved because the loopholes in securities law makes them too uncomfortable. And those who aren't careful (or just don't care) can end up exploiting the loopholes too much and go from a grey area to a definite black. But Joshua has stayed on the right side of the law and not had any problems. He's using this investment strategy to diversify Magna and fulfill his dream of being in the entertainment world.
Sason has always been the type of person that believed you can achieve anything you truly believe in.
In an entrepreneurship class at Hofstra in 2009, Sason conjured up a plan to import sand from Israel and sell it as a collectible item that he called “Sand from the Holy Land.” He liked the 2006 Oprah-endorsed documentary The Secret, based on a self-help book about the power of positive thinking. A friend of his says that Joshua still talks about his belief in the book's "law of attraction", which teaches the principle of achieving anything by imagining it will come true for you.
The way that Joshua Joshua tells his story, his life pretty much turned out that way. He says he was in Puerto Rico on vacation with his family when he read 'The Intelligent Investor", a classic investment strategies book from 1949, written by Benjamin Graham. A man that Warren Buffet names as one of his inspirations. "It was pretty much a life-changing moment for me," Joshua gushes. "I read it once. The second time I read it, I went through it and highlighted it. The highlights became a guideline for me to write my own interpretation."
Sason says in 2009 he doubled his bar mitzvah money on blue-chip stocks. “I realized I had maybe a little bit of a knack for how investing works,” he says. His mother allowed him to borrow her retirement savings to make investments, he also took a “low six-figure” loan from a friend of the family, and started Magna from his bedroom.
The business grew, Sason says, as word spread about how Magna could finance small companies.
“It was a gradual and progressive growth,” he said. “There wasn’t anything in particular that I would recall from back in the day, to be honest with you.”
Some found it hard to believe, a wannabe rock star becomes a millionaire investor through penny stock trading strategies. But it's true, even if the penny stocks trade is bemoaned and looked down upon by others.
Penny Stocks Investment History Not Very Glorious
The market for penny stocks can be traced back to the scrum of stock brokers who used to trade stock shares that weren’t at all welcome on the New York Stock Exchange. A 1920 finance article in Munsey’s magazine called penny stock brokers “a close-packed mass of creatures apparently human” and described the auctioning of shares in a puppy.
Penny stocks investments have always been seen as a disreputable sector of the stock market. Many listings are totally bogus. Most penny stocks are, at best, just some guy with an idea, and usually that idea is to raise money to pad his own pockets. Other penny stock listing are failing businesses that got dropped from the major exchanges because they're on the brink of failure. But it doesn't matter, it's all about an elite understanding of the stock market.
Not Just Stock Trading Strategies - A Desire To Help
An analysis of 80 public filings shows that a company that does a deal with Magna sees its shares tank 55 percent on average over the next 365 days. Most of these businesses never recover and end up trading for thousandths of a penny or less. Joshua says that’s not Magna’s fault.
“I want to help the company, I really do,” he says. “We never, ever make an investment where we knew our activity in the marketplace would potentially decrease the value of the company. There would be no benefit for us.”
Magna’s scored the biggest in 2013, when it invested in a shipping company out of Greece avoid bankruptcy, the company is named Newlead. The company, which at one point owned 15 container ships and tankers, was down to its last four vessels.
It had just enough money to cover about a month of operating losses.
The deal had a twist. Instead of giving Newlead a loan, Magna paid some of the shipper's lenders for the right to collect its old debts. Magna had to sue Newlead to collect, the two companies quickly reached a settlement where Newlead agreed to give Magna steeply-discounted stock that it could sell right away. A New York state judge gave the OK on the agreement.
Sason said in an affidavit filed in the case that Magna, together with an unnamed partner, paid off $45 million of debt and received stock that it sold for $62 million—a $17 million profit before expenses.
Rivals in the business say that penny-stock financiers typically demand at least a 50 percent return, a figure supported by SEC findings. Sason says he can count “on one hand” the deal that backfired on him. Sason's investment returns would beat almost any hedge fund you could think of. “The returns are healthy,” he says. “We’re not getting into any business or any strategy not to be profitable.”
We'll just call that an understatement.
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