Biotech Values

[DewDiligence]

Blast from the past… this was one of the first scam-
related posts on this board more than four years ago.

http://tinyurl.com/29pylj

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Polaroid Stock Rallies Despite Being Virtually Worthless

By Jeffrey Krasner
18-Oct-2003

This isn't a dead cat bounce. This is a dead cat with wings and a rocket engine.

Shares in Polaroid have staged a remarkable rally, surging 170 percent in the past 2 1/2 weeks. Since Sept. 3, they're up about 700 percent.

Even so, after the run-up, the shares are worth a mere 13.5 cents apiece. And soon they may be officially worthless.

These shares have nothing to do with the profitable, privately held company that was created by the sale of Polaroid's assets by a US Bankruptcy Court in June 2002. They represent an interest in the "old" Polaroid, a shell now called Primary PDC Inc., which exists only to wind down the affairs of the instant camera company, which declared bankruptcy in October 2001.

The spike is even more remarkable because the old firm is slated to dissolve in weeks. On Nov. 14, a hearing in US Bankruptcy Court in Delaware will review Polaroid's reorganization plan. If it's approved, as expected, shareholders in the old Polaroid will get nothing.

The rally has one longtime Polaroid watcher scratching his head. "I think it's kind of interesting for a dead stock to be moving," said Stephen J. Morgan of Natick, who owns 3.5 percent of the old company's shares.

Morgan held or acquired the shares as he battled unsuccessfully for a role in the bankruptcy proceedings for Polaroid shareholders. He claimed that the company's filing was fraudulent and unnecessary. Last month, a court-appointed examiner rejected many of Morgan's contentions, although they will be considered at a separate hearing in November.

Stock exchange specialists said there's actually a tradition of trading in "death row" stocks.

"This is a variation on the old P.T. Barnum adage that there's a sucker born every minute," said Andrew Lo, a professor of finance at the Alfred P. Sloan School of Management at MIT. "There's an investor making a mistake every minute."

Meanwhile, he said, savvy speculators can earn a profit on the shares -- "as long as they're not the last ones out."

Even the confirmation of the reorganization plan -- a move that would essentially wipe the old company off the face of the earth -- might not halt the trading. Investors have continued to trade worthless securities after the underlying firms disappeared.

Officials at Pink Sheets LLC, a New York company that provides prices for many thinly traded over-the-counter stocks, said trading in shares of Boston Chicken Inc. was halted only a few months ago. Never mind that the bankrupt restaurant chain disappeared in 1999, when it was purchased by McDonald's Corp.

Some zombie securities show occasional signs of life.

Thousands of French families invested in Russian railway bonds before the Bolshevik Revolution of 1917, which repudiated all the debts of the czarist regime. Trading in the bonds continued unchecked for nearly 80 years, when President Boris N. Yeltsin of the Soviet Union authorized a payment of kopecks on the ruble to the long-dead investors.

Cromwell Coulson, chief executive of Pink Sheets, speculated that old Polaroid shares might have appreciated as short sellers covered their positions, that is, as speculators who had borrowed stock and then sold it had to buy shares to repay their obligations to lenders. Other investors, he said, might just be delusional.

"Uninformed investors who don't know what they're doing get themselves in trouble," he said. "This is investors losing money because their short-term greed makes them jump at something without understanding what they're buying."

Full understanding might prove daunting. The Bankruptcy Court docket contains more than 3,000 entries, of which many are hundreds of pages long. The reorganization plan is more than 100 pages long. Amid all that verbiage, one salient fact lies hidden: Shareholders won't get anything from the old firm. Not one thin dime.
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