CNN: "Boots & Coots gushes Too bad it might go bankrupt."
The 'hellfighter' stock is up more than 300% this week. Too bad it might go bankrupt.
March 19, 2003: 11:23 AM EST
By Paul R. La Monica, CNN/Money Senior Writer
NEW YORK (CNN/Money) - Usually when a company says it is considering filing for bankruptcy, its stock plunges. Not Boots & Coots, a company that focuses on fighting oil well fires.
The stock has surged nearly 400 percent since announcing that it might file for Chapter 11 bankruptcy protection on Feb. 18 and is up more than 300 percent this week alone.
Why? It appears that investors are hoping that the company will do major business if Iraq sets its oil fields on fire once war starts. A Boots & Coots (WEL: up $0.46 to $2.36, Research, Estimates) competitor, RPC Inc., has shot up 32 percent this week as well.
Even though the companies might benefit from Iraqi oil fires, day traders are probably fueling this surge, and the average investor should stay away, said Dan Pickering, director of research for Simmons & Co., a Houston-based investment bank focusing on the energy sector.
"There is no doubt that if Iraq torches oil wells there will be a huge amount of business for these companies," Pickering said. "But this is a very speculative investment."
Both companies have relatively small market values, tiny floats and no mainstream analyst coverage. So they will probably be extremely volatile and are likely to drop once the war is over.
That's what happened to RPC (RES: up $0.51 to $12.31, Research, Estimates) in 1991. The stock soared 35 percent during the Gulf War but by the end of 1991, it was back to where it began before the war started. Boots & Coots was not publicly traded during the Gulf War.
And just a reminder: Boots & Coots is considering a bankruptcy filing. If history doesn't repeat itself and Iraq leaves the oil wells alone, look out below.
So investors interested in oil fire fighters would be better off saving their money and renting John Wayne's "Hellfighters" instead of buying these stocks.
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