Social Network With No Members Valued At $6 Billion

The headline kind of says it all, but just in case I’ll put it another way: we are totally in the middle of a social media bubble.

This amusing tale of mass idiocy comes from the Wall Street Journal, citing an earlier report from the investor blog zerohedge.com, which stumbled upon a social media company, CYNK, that trades in the penny stocks based solely, it would appear, on some SEC filings.

Indeed, the term “social network” must be used only loosely, because -- as CYNK freely admits -- it has no members, no revenue, no assets, and only the vaguest hint of a business model. But none of this has stopped CYNK from amassing a whopping market capitalization of $6 billion in recent weeks, as the stock’s value soared more than a hundred-fold to over $14.

Although some things don’t seem quite above board -- the company has four CEOs, one of whose corporate address is in Belize -- as zerohedge.com and the WSJ point out, it’s not like CYNK is pulling a fast one on investors, since it is totally up front about not, like, existing. The company’s business filings contain some gems like this: “We are a development stage company formed in the state of Nevada on May 1, 2008 as a web based social network service founded on the premise that personal networks and contacts are valuable.”

The company adds: “We have not yet commenced our full scale business operations and we have not yet realized any revenues. We have minimal operating history upon which an evaluation of our future prospects can be made. Based upon current plans, we expect to incur operating losses in future periods as we incurred significant expenses associated with the initial startup of our business. Further, we cannot guarantee that we will be successful in realizing revenues or in achieving or sustaining positive cash flow at any time in the future. Any such failure could result in the possible closure of our business or force us to seek additional capital through loans or additional sales of our equity securities to continue business operations.”

Oh, also, by the way, CYNK also admits it has poor internal oversight: “Material weaknesses noted by our management include lack of a functioning audit committee; lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; inadequate segregation of duties consistent with control objectives and affecting the functions of authorization, recordkeeping, custody of assets, and reconciliation; and, management dominated by a single individual/small group without adequate compensating controls.”

Six billion. You can’t make this stuff up. Happy Friday!

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