What Would You Sacrifice for Mind-Blowing Returns?
By Tim Hanson
May 11, 2007
The American Stock Exchange (AMEX) recently announced plans to try to become the exchange for micro-cap stocks. Forgive me if I run screaming from the building.
Why? Well, the AMEX is the least reputable of our major U.S. exchanges. It lists more than its share of questionable companies and has a long history of not delisting companies when it should. In other words, investors would be wise to face any AMEX stock they come across with a hefty dose of skepticism. As the exchange's chief regulatory officer Claudia Crowley revealed to Forbes in October, "25% of the stocks listed were exceptions to our guidelines."
And those guidelines were never too strict anyway. Now enter The American Platform (TAP), where a company will be allowed to list so long as it has a $50 million market cap and $4 million in shareholder equity.
Here's the problem with that
While the AMEX sees TAP as a "farm system for micro-cap stocks," I see a haven for penny stocks and pump-and-dump schemes. And the AMEX doesn't necessarily disagree. Here's what AMEX CEO Neal Wolkoff told Forbes: "I'm not holding out TAP stocks as the creme de la creme, because they're not. That doesn't mean people should not be allowed to buy them."
I'm all for investor freedom, but the companies I foresee being listed on TAP will be accorded a degree of credibility (thanks to their listing on a major exchange) that they likely won't deserve. Yet, they won't be without appeal. Many of these stocks will be proverbial lottery tickets -- undergoing huge price swings in short periods of time. For example, there have been 52 companies capitalized at less than $200 million that have at least doubled since January. That's true of just 11 companies capitalized at more than $500 million, including First Solar (Nasdaq: FSLR), Dendreon (Nasdaq: DNDN), Terra Nitrogen (NYSE: TNH), and Novatel Wireless (Nasdaq: NVTL). |
