GHOST STOCKS!
By Aldo Svaldi
Denver Post Business Writer
Wednesday, October 31, 2001 - Boston Chicken has no assets to claim, no headquarters to call home and not a single chicken to rotisserie. But its stock, supposedly canceled, continues to trade thousands of shares a day.
Welcome to the world of the corporate living dead, where stocks and bonds can live on long after the company itself has vanished.
Boston Chicken is only one of at least 10 Colorado zombie stocks The Denver Post has uncovered. Somewhere in the cobwebs, investors - sometimes through ignorance - are still trading them.
McDonald's Corp. bought Boston Chicken's assets out of bankruptcy in May 2000, making the renamed Boston Market a wholly-owned and private subsidiary.
"Previously issued securities of Boston Chicken Inc. were canceled under the terms of the plan of reorganization and are no longer publicly traded," Boston Market warns on its website.
That epitaph, however, has failed to keep the old Boston Chicken, one of the hottest stock offerings of the mid-1990s, from trading 7,000 shares at 4 cents Oct. 29. It has gone as high as 25 cents in the past year.
"I can't tell you why there would be markets in something where there is no entity there," said Jeff Ploen, who deals with shell companies and microcap stocks.
Boston Chicken bankruptcy trustee Gerald Smith said the stock was canceled, but shareholders, for whatever reason, keep trading it. He has tried to have regulators address the issue but without success.
The problem is common. After executives shipped bricks instead of computer parts to boost their revenues, Miniscribe died in infamy.
Or did it? Gone for more than a decade, 500 phantom shares traded on Oct. 17 at 1/100th of a penny.
"There are a lot of scary stories about a lot of famous companies," said Ron Blekicki, publisher of the Microcap Analyst in Boulder.
Western Pacific Airline's stock continues to fly although the bankrupt Colorado Springs carrier hasn't moved any planes or passengers since February 1998. Other phantom companies have disappeared in the middle of the night or seen the founder die under mysterious circumstances.
The netherworld these corporate living dead haunt is called the Pink Sheets, home to more than 4,100 stocks, many of which have been de-listed. That twilight zone contains 126 Colorado securities, including new economy stars ICG Communications and Rhythms NetConnections Inc.
Most of the Pink Sheet companies are better described as the near-dead and the forgotten. They still have phones that get answered and regulatory filings that get made.
Bolder Technologies, the Golden-based battery maker, filed for bankruptcy protection in April. Management told investors that even if a buyer emerged, they would get nothing.
Still, the stock trades at 0.0016 cents a share. The company has 17.2 million shares and a market value of only $27,000 - less than the price of a sport utility vehicle.
No power to exorcise them
Even the near-dead can have some value to private companies wanting to go public more cheaply than underwriting an initial public offering. Blekicki said a shell company that continues to report and trade can be worth $250,000 to $500,000.
That doesn't explain why companies who properly bury their stock with the authorities continue to see trading.
In August 2000, Capital Associates announced that it had fewer than 300 shareholders and that it would de-register its stock. Laser Storm, a franchiser of laser-tag game centers, did the same in May 1998.
Laser Storm franchises continue to operate. And although the corporate parent is gone, the stock trades now and then.
Cromwell Coulson, who runs the Pink Sheets, said he would prefer if the phantom stocks would go away. He also complains he doesn't have the power to exorcise them - something only the Securities and Exchange Commission can do.
"I would rather have active companies," he said. "These are the dregs, but they don't trade much volume."
Zombie stocks continue to trade because of two things: investor stupidity and the need for short sellers to cover, Coulson said.
People should be smart enough to research the company behind the stock symbol, but they sometimes aren't, he said.
Short sellers are more complicated. They borrow shares in overvalued companies they suspect are ready to fall with the obligation to repay those shares in the future.
If the company stops trading, short sellers are forced to realize their gains and pay taxes. If the stock continues to hover, even at a few pennies, they can hold off.
Most stocks fade with their companies, said those who follow the smallest of stocks. Some may hang around a while after bankruptcy, but eventually they, too, go away.
Blekicki said the ones that continue to haunt often have unsettled histories - accounting improprieties, lawsuits that drag on, bankruptcies and mergers that leave shareholders out in the cold.
One of those unsettled stories is that of Cray Computer.
Coloradan Seymour Cray was a legendary computer scientist - many consider him a father of supercomputing. In 1972, he started Cray Research and in 1989 launched Cray Computer, a public company.
Bankrupt in 1995
But supercomputers lost their edge, and by 1995, Cray Computer was bankrupt. It laid off its 300 workers and liquidated its remaining assets.
Thirteen months later, Cray had moved on and started a new company, SRC Computers Inc., but didn't live long enough to see it through. He died in October 1996 in a highway accident that some of his investors considered suspicious.
His remains were cremated, and the ashes were scattered at an undisclosed location in the mountains.
Workers at the private company he founded shortly before his death, SRC, vowed to go on without him. In January, they unveiled their first supercomputer, bringing his vision to life.
Cray Computer's stock continues to trade at 1/50th of a cent and has reached as high as 1.5 cents.
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"Even the near-dead can have some value to private companies wanting to go public more cheaply than underwriting an initial public offering. Blekicki said a shell company that continues to report and trade can be worth $250,000 to $500,000."
Don't get your hopes up. SPUM does not "continue to report". None of those myriad promises came true. SH wants to litigate whether any lies were told about that, or whether an observer like myself could legally express that opinion but the fact is that we are approaching 3 years from the date that the filing deadline was set and I still can't find any filings. Maybe buried way down in the Towering Scrap Heap in the very shady area beneath the overpass.
Anybody call or email the excellent CEO this week since the websites went dead? Pls try it and let us know.
GO SEC - GO FBI
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