How to Make Millions on Penny Stocks

Sason, who has full sleeves of tattoos he covers with tailored three-piece suits, calls himself a self-taught value investor. He has about 30 employees in trading, venture capital, music, and film. “I’m not going to give away the details of how we do what we do,” he says in a January interview at his 16th-floor office in Manhattan’s financial district. “We create businesses, and we invest.”

Actually, it’s a little more complicated than that. What Sason discovered is a way to get shares in desperate and broke companies at big discounts by lending them money. Magna has done deals with at least 80 companies. Of those, the stocks of 71 have gone down since the investment. He can still turn a profit, because the terms of the deals allow him to turn debt into equity at a fixed discount. No matter where the stock is trading, he gets it for less.

Magna functions as a pawnshop for penny stocks—shares of obscure ventures that change hands far from the rules of the New York Stock Exchange. His customers have included a would-be Chilean copper miner, an inventor of thought-controlled phones, and at least two executives later busted for fraud. They come to Sason to trade a lot of their stock for a little bit of money. Often they’re aware the deal is likely to be bad for their shareholders.

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