Deer Consumer Products (NASDAQ:DEER)

The Financial Investigator

For four months between November 2010 and February 2011 the shares of Deer Consumer Products, a Chinese manufacturer of household applicances, remained ironbound in a range between $11 and $12. It’s notable for several reasons, not the least of which is that a widespread rout was then well underway among Chinese reverse merger stocks. Yet as the chart shows, DEER’s share price barely wavered even as short-sellers began to increasingly bet against it and the market for similar high-fliers collapsed.

Rather than supposing DEER had a uniquely loyal shareholder base who refused to sell because of an evangelical belief in the value of their investment–similar to those holding Berkshire Hathaway–a more likely explanation is that DEER is alleged to have paid $350,000 to a Manhattan penny stock brokerage to peddle its shares during this period. DEER is essentially running up a massive red flag: On Wall Street, a company that pays a brokerage to sell its shares is considered even more desperate a move than than hiring a firm to provide research coverage. It is a virtual acknowledgment that its shares cannot be sold through traditional means and as such, has long been relegated to the far fringes of even the penny stock world.