Rumor Stocks: Good Buys Aren't Always What They Seem
April 21, 2004
Walter B. Schubert Jr. After 25 years on Wall Street, it still amazes me how intelligent human beings continue to be drawn into the too-good-to be-true, once-in-a-lifetime investment opportunity.
The latest rumor stock to cross my path is Triangle MultiMedia Limited, promoted as a new gay cable channel (not to be confused with media giant Viacom's (NYSE: VIA) plans for a gay network called Outlet, or Canada's PrideVision TV).
In this case, a neighbor I hadn't seen in ages but who remembered me and that I was gay, stopped by last weekend to ask me about "that new gay cable channel," Triangle MultiMedia.
I told my neighbor I had heard of the company, and had in fact received some emails from GFN readers asking why we hadn’t written anything about them. I also noticed "the action" in the stock in the past few weeks – hundreds of millions of shares changing hands – and that its price had moved from less than one cent a share up to as high as 3 cents a share.
Yes, you read correctly - that’s the total price of a share.
Triangle Multimedia Limited, Inc. of Palm Springs California (OTC symbol QBID) is a penny stock traded in the Pink Sheets (more on that in a moment). My neighbor claimed he has been day trading this stock for a while with his average daily positions in the millions of shares.
So now I'm more than a little curious – I needed to know more about this company. Easier said than done.
Finding any hard information on Triangle MultiMedia Limited at all was nearly impossible. I started first with the company's own Web site, a scant affair of about 700 words, but it gave no information for any potential investor.
Of course, there's nothing like going to the source, so I called the company. Unfortunately, there was no one to speak with besides the guys answering the phone, and there was nothing they could send me, and no investor relations man or woman to call me back. But they did tell me "stuff" is coming, a declaration that didn't instill confidence.
Next stop was the Securities Exchange Commissions EDGAR filing system. This is where one can go to see company filings like a 10K or 10Q reports, the reports that listed public companies, like those that trade on the NYSE, must file.
After spending some time searching for information I could reasonably base an investment decision on from the SEC, I found nothing … because there are no reports on file at the SEC on Triangle.
That's not so unusual in this case, though, because this is a penny stock traded in what's called the Pink Sheets, a name derived from the color of the paper that penny stocks daily quotations used to be printed on. (It has nothing to do with anything gay, just a happy coincidence.)
But what are the Pink Sheets anyway, and are they a reliable research tool?
The first thing to know is, the Pink Sheets is not a stock exchange and is not regulated by any governmental entity such as the SEC.
Price quotations are provided by Over the Counter, or OTC, market makers and company information is provided by the OTC companies themselves. Investors should be aware that any market quotation information is not verified and has not been reviewed by any regulatory body.
The Pink Sheets is a centralized quotation service that disseminates market maker quotes (those are the licensed individuals registered with the SEC – not my neighbor) for OTC securities.
OTC securities are issued by companies that either choose not to, or are unable to, meet the standards for listing on the NASDAQ or a stock exchange. Quotation of a security in the Pink Sheets does not in itself create any ongoing filing or reporting obligations with the SEC or the NASD for the issuer.
In simple terms this means they usually contain a high degree of risk. And to that I say: goodbye. Goodbye house, goodbye car, goodbye retirement, if you're trading in OTC securities with serious money.
Usually OTC issuers are small companies, very small, with sometimes only a couple of employees, very limited operating histories and usually under lots of pressure financially which means that they can quickly disappear into thin air. Investors should always be wary of any sign of fraud or manipulation.
I wish I had a special clairvoyance to pick the right stock at the right time, but there are some good, basic demarcations for those of us without magic powers. Audited financial reports, Management Discussion and Analysis, cash flows, debt ratio, product line, profitability, etc., allow those of us without the ability to see into the future some real basis to determine whether it's a reasonable risk to put one's hard-earned dollars – or pennies – into a stock.
So far, I haven't been able to get this kind of information about Triangle MultiMedia. And to invest in a company you can't get information on is, to say the least, unwise.
Truth be told, I'm excited about the prospect of a gay cable channel, and would potentially invest in one. I'd love nothing more than 24/7 programming for our community and culture, similar to Robert Johnson's BET, Black Entertainment Network (a Viacom company, by the way). But is Triangle MultiMedia the investment we’ve been waiting for?
We'll keep an eye on the company going forward, hope for the best, and report next when real financial information becomes available.
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