The Fairy Tale

Buy Zeigletics!

THE GRIMMSIAN ACCOUNTS of company operations that one can read on these online services demand, even from the dimwitted, a mild suspension of disbelief. More often than not, the stocks trade on wildcat Canadian exchanges, and the "corporations" (which may be nothing more than two- or three-man operations) are primarily doing business in countries that the average American citizen couldn't place on a map, making the business story that much harder to follow (useful for the Hypester).

And what types of business are these companies doing abroad? Well, take Wye Resources, the Canadian owner of a Zairian diamond mine. (Despite its failure to secure enough crystallized carbon to inlay a single diamond hairpin, Wye--a HOT STOCK promoted on several online services--witnessed a 300% gain in its stock in less than one month before regulators stepped in March 1994, having detected an unexplained 62% increase in shares oustanding. As of this writing, the stock has yet to resume trading.)

Or how about ITP Thermal Packaging, the Canadian developer of a technology for aluminum cans, which cools the drink automatically upon a user's popping it open? Never mind that vending machines already dispense cool drinks, and never mind the cooling ability of your own refrigerator. . . the point is to suspend your disbelief!

Or consider the HOT STOCK we'll be looking at closely for the remainder of this article, Interlock Consolidated Enterprises (ILS). The company provides materials for pre-fabricated housing to the "exciting" Russian market. The excitement largely surrounded an announcement of multimillion dollar contracts with Russia for unbuilt houses planned for returning Red Army soldiers. A quick buzz over to ILS Headquarters turned up only this: Interlock received no money upfront and would not comment on the pending contracts. So, what was the name of the Russian company involved? That too had to be kept secret. And each of ILS's press releases ends with a disclaimer never seen on those of listed U.S. companies:"This press release has neither been approved or [sic] disapproved by any Exchange or Regulatory body."

Below, we print the closing prices and daily volume for Interlock (ILS.E) as quoted by Prodigy members for the first three weeks of March 1994. . . the period of its HYPING. For perspective, consider that the company traded 175,000 shares for the whole month of December. Original mention of this stock on Prodigy occurred on February 22nd at a price of $0.25. (N/A means "not available.")

Date     Price     Volume                    
3/2:     $0.42     165,500  "BIG NEWS COMING!"
3/3:       N/A         N/A  "BUY! BIG NEWS!"
3/4:     $0.46     156,000  "BUY! BUY!"
3/7:     $0.57     324,000  "BUY!"
3/8:     $0.64     416,000  "BUY!"
3/9:     $0.74     478,000  "BUY! LOOK AT IT GO!"
3/10:    $0.72         N/A  "BUY!"
3/11:    $0.86         N/A  "BUY!"
3/14:    $0.96     602,900  "BUY! NO STOPPING IT!"
3/15:    $1.06     255,200  "BUY!"
3/16:    $1.15     194,000  "BUY! COME ON NOW!"
3/17:    $1.30     349,000  "BUY! BUY! BUY! BUY!"
3/18:    $1.00     358,000  ("UM. . . HMMMM. Ssshh.")
3/21:    $0.96     235,150  ("SSHHHHH. Sell. Sssh.")
3/22:    $0.76     159,000  ("Sell, sell, sell. . . .)

As of a few months later, Interlock had resumed trading a couple thousand shares a day again, having dropped below $0.50. The Hypester, of course, had moved on.

David Gardner and Tom Gardner, The Motley Fool, Copyright © 1994