Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : DGIV-A-HOLICS...FAMILY CHIT CHAT ONLY!! -- Ignore unavailable to you. Want to Upgrade?

To: sandstuff who wrote (15616)	6/24/1998 7:55:00 PM
From: ANALYST10	Respond to of 50264

Since we are on an educational roll, here's a little more food for thought. Another indication of the quality of a stock are the Market Makers. With most stocks that have some true market support you will see what are "retail" houses making the stock. I'm using an extreme, but if you look at a YHOO you will see GSCO (Goldman Sachs), SBSH (Smith Barney Shearson), etc. these are institutional and retail firms. The names you see in this stock are all third market and trading houses. HRZG (Herzog), MASH (Mayer Schweitzer), NITE (Knite Securities), TSCO (Trosster Singer), etc. These names may not mean anything to the general public, but these are what as known as third market firms. A third market firm is firm that takes orders from other brokerage houses and rebates them for the order flow. Let's say a stock is trading at $3.00 offer, if you small brokerage firm place your order with HRZG for example, at the end of the month they will rebate you either $.01 or $.02 per share depending upon the deal you have with them. This by the way is perfectly legal. They usually see most of the order flow in these stocks. One thing that is absent from DGIV is any retail support behind the stock. There is no particular brokerage firm that is going out to the public and pushing the stock. This by the way is for another reason and Lesson 2: it is called designated securities. DGIV classifies as a penny stock under the rules 15c2-6 under the Securities Act. A retail broker may not solicit a retail client in this stock unless the client fills out a host of forms which basically says, the trade was unsolicited, the customer is aware that he can lose his entire investment and a myriad of other scary statements that a broker would rather not deal with. Its tough to tell a client I am recommending this stock but before I buy it for you you have to sign these papers which say you will probably lose your investment. That is one aspect of the designated security problem. By the way it becomes a designated security if the trading price of the stock is below $5 on the bid. In order to receive an exemption to the $5 rule, the company must have $4 million in assets and a $2 million TANGIBLE net worth and I won't even get into what they consider tangible because I will start another argument since DGIV's assets are not tangible under the rule. The other exemption is an average of $6 million in revenues over the last 3 years. In addition, in order for a brokerage firm to trade this stock, the stock must be "Blue Skied" in the state that the stock is being sold. The Blue Sky Laws are state laws which each state has its own set of criteria for a stock to be eligible for sale in a particular state. The exemption to the Blue Sky Law is an "unsolicited" trade which means the broker didn't call you, you called the broker (this rule is abused also. Instead of trying to get Blue Skied in each state, some states recognize a Standard & Poors Listing, which the company can apply for. Although the number of states that accept the S&P listing as an exemption for this type of company is only a handful. So goes my other lesson for the day. But remember, they all say I don't know what I am talking about, so I must have made it all up. Anyway, I won't argue with them tonite, this is just some food for thought. This is one of the reasons that when some BB stocks break below $5 they collapse, because the retail firms that are supporting them can no longer buy the stock for their clients. By the way, one thing I did forget, even if the stock isn't a designated security, it must be Blue Skied in the state to be eligible for sale regardless. So therefore, this stock could not be retailed anyway. To answer the next question somebody might have, no this stock does not have an S&P listing either, that I can find.