Many investors consider IPOs to be the most tantalizing potential investments. It's not surprising; some are exciting, forward-looking start-up businesses with the potential for monster growth. Of course many also have daunting risks – like non-existent profits that are nowhere in sight.
However, there's one prospective IPO out there right now that investors should consider -- and by consider, I mean consider as a fun yet cautionary, "buyer beware" tale. It's wild, it's wooly, it's extremely risky.
An entity called Bigfoot Project Investments has filed for an initial public offering. The IPO filing makes for some amazing reading about a creature many consider nonexistent, but for potential investors, the lessons in risk in this proposed penny stock are very real.
Cryptozoological media circus
Yes, this company name refers to that Bigfoot -- the tiny operation is all about finding Sasquatch. Yeti. Man-Beast. Mono Grande. Fear Liath. Yowie. Whatever you want to call it. (The filing reveals many interesting elements, but just one is that there are indeed a ton of different names for this creature across the globe.)
Bigfoot Project Investments' major source of revenue is defined as documentaries and specials on DVD and other mediums like video on demand. These will cull Bigfoot hunters' progress and broadcast things like eyewitness accounts and purported evidence of the supposedly gigantic creature with such a huge footprint and yet such woefully poor visibility.From the get-go, one's imagination can run wild simply trying to figure out what industry this company even fits into. Is the cryptozoology industry "real"? I suppose that like all of Bigfoot's mythical creature brethren, that's up for interpretation.
In addition, the company plans on offering consumers expeditions into areas that have gained a reputation for being fertile ground for Bigfoot sightings; they also plan to film and market these types of adventures to the public.
Management may have a point that there's a market for this sort of thing. Now that we've figured out that the industry at hand is "entertainment and media," the number of TV shows devoted to paranormal topics does indeed indicate that somebody's interested – and tuning in. (Guilty as charged: I've been known to watch shows about ghosts and hauntings. They make good vehicles for popcorn, nachos, and other delightfully unhealthy snacks.)
Regardless, though, even if one kind of likes the idea that ghosts, Yetis, Nessie or Chessie, Chupacabra, or aliens might be running around out there (can't there be more magic in the world?), investing in a Bigfoot pure play is more dangerous than running around in the dark swamp looking for Skunk Ape without boots or an infrared camera.
About that rubber suit
A glance at the IPO filing shows that the numbers are as scary as a chance encounter with an angry Sasquatch (after all, they apparently just can't stand paparazzi).
Bigfoot Project Investments' current revenue rate is $2000 -- per year. Nope, that's not a typo. $2K. It discloses an annual cash burn rate of $25,000. (It's expected to increase to $50,000 to $100,000 per year -- all the more reason that potential investors would have to desperately hope that revenue generation would increase exponentially as hoped.) The entity has less than $650 in cash on hand. The company reported a net loss of $29,620 in the year ended July 2014.
Bigfoot Project Investments does have quite an interesting stable of assets, though. You'd be hard pressed to find similar ones in other companies' SEC filings. These include:
- Footprint cast of Bigfoot -- 73 original casts.
- The rubber suit from a 2008 hoax.
- Photographs of a dead creature from a Strickler, Arkansas incident in 1994.
- A 109-inch skeleton.
- Some DNA samples from hair and nails.
- DVDs, documentaries, and other stuff.
The list also includes various rights to some exclusive Bigfoot media content such as Websites and radio shows, as well as 360 hours of raw footage from some Squatch-hunting expeditions.
There's also a dinosaur fossil listed, which could sound kind of promising; according to the filing, a paleontologist valued it at $1.2 million.
Beware the penny stock siren song
If the aforementioned financials aren't big enough red flags, here's another thing: language commonly called a "going concern warning." If you run across something like that in an SEC filing, you can generally take that as a major negative, and it's more chilling when they're present for a company right out of the gate.
It goes like this:
Our auditor has raised substantial doubts about our ability to continue as a going concern and if we are unable to continue our business, our shares may have little or no value.
Further, in its risk factors:
Because our auditors have issued a going concern opinion, there is substantial uncertainty we will continue operations in which case you could lose your investment... This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue in business. As such we may have to cease operations and you could lose your investment.
Granted, this stock will go public as what is known as a penny stock, with a proposed offering price of $0.10 per share. Many investors love penny stocks – and many of us long-term buy-and-hold investors would call those folks "gamblers." Penny stocks tend to be the riskiest stocks around. If they're not outright scams -- and many are -- they're priced so low for a reason.
We can give Bigfoot Investments points for honesty, though. The risks are well outlined in the filing. If investors lose their money once this baby goes public, they've got no one but themselves to blame. Of course, this is the lesson: read those IPO filings. They exist for a reason.
Buying into Bigfoot
This IPO possesses its own form of entertainment value. The SEC database couldn't be called a repository of creative reading on topics like mythical creatures (although you can find a lot of scary things about public companies hiding in plain sight, but that's another topic for another day). I can't recall reading an SEC filing this wild and interesting in the last 20 years.
Granted, for some, maybe this could be a novelty investment, some form of Beanie Baby for their portfolios (ticker symbol possibility: YETI?) Novelty isn't the same thing as a sound investing idea, though.
Don't get me wrong, I'd be delighted if Sasquatch was real (although I'm partial to Nessie). Part of me pulls for those stalwart Bigfoot hunters, tramping through the dark woods, persevering among all kinds of uncomfortable conditions including some degree of public mockery not to mention treacherous con artists and their cruel Bigfoot hoaxes.
However, I'd bank on the idea that the mythical beast will stay mythical, and this company's financial growth and success could remain just as elusive as the creature it hunts once it sells its shares to the public.
Some investors may enjoy this kind of penny stock hunt. But their dollars may disappear faster than – Bigfoot? Was that you? Oops, whatever that flash in the corner of the eye was, it's gone just that fast.
Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.