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Microcap & Penny Stocks : GBFE - GOLDEN BOOKS FAMILY ENTMT INC
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To: Sethpop who wrote (465)9/12/1999 11:09:00 AM
From: Sethpop  Read Replies (1) of 476
 
Why is the Price Higher than Value?
This is very common with Chapter 11 companies in the "twilight zone" of
between when they file Chapter 11 and the final reorganization plan is
put into effect. In fact, one very bizarre case was Discovery Zone where
on the very day the stock was cancelled the stock zoomed from ten cents
to a dollar (for a few minutes) as people misunderstood the press
release which talked about the "new" people who had taken over the
company (without realizing that those "new" people also had been given
ALL of the "new" stock and thus their stock was worthless.)
The basic reasons seem to be:
a.) Inertia on selling...Those who should be selling do not as they feel
"How much more do I have to lose...so may as well hold on till the very
end" (Well, what you have to lose is the total value after commissions
you could get by selling...so if you want to throw it away, please give
it to me!)
b.) Greed...People see these things bob up and down and hope to "double"
their money with no research, no effort etc. Thus the prior bizarre
behavior of some of these in Chapter 11 (like Caldor, Bradlees, Edison
Brothers etc before the stock was cancelled) has reinforced "bad"
behavior.
c.) Confusion and ignorance about what is truly happening in Chapter 11
and so people do buy because they see good crowds in the store and have
a difficult time separating the future of this piece of paper called
"old common stock" with the future of the company. Yes, Pokeman will
make money for GBFE...but unfortunately not for the benefit of the "old"
common stock holders.
d.) Traders and Hypesters who prey on b.) and c.) above to promote and
get people to buy.
e.) In the early stages short covering of massive short positions
usually taken as the stock is cascading towards bankruptcy...
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