Even dead companies can attract live investors
THEIR names may live in financial infamy, but then a sucker is born every minute. Two of Russia's most notorious bust banks, a bankrupt oil company and a dodgy construction firm attract no interest among the hard-bitten brokers in Moscow. But in the fevered world of German small investors, they are still hot stocks.
The four companies—all, in effect, bankrupt shells—are traded on Newex, a specialist Austrian-German bourse for Central European shares. Every now and then their prices rocket or slump. “I can give you no idea why people are buying those shares: it is not for us to know or judge,” says Lars Hofer, a Newex spokesman.
So why is an otherwise respectable exchange trading stocks that, in effect, do not exist? One shell company, Chernogorneft, helpfully lists its cashflow for the past year as “nil”. Mr Hofer admits that the shares are “pure speculation” but insists, a touch defensively, that “trading shells is common on every stock exchange”. The four companies are, for example, traded in largely unregulated over-the-counter dealings in North America.
The shares' activity is due to pyramid schemes. These ramp up prices of obscure stocks to attract gullible investors, then dump them, leaving the organisers with a profit and the suckers with a loss. The stellar performance of (real) Russian stocks this year helps the spin. The pyramid outfits warn punters not to believe Moscow-based brokers (who are aware of their scam) because all advice from Russians is untrustworthy. Not like those reliable Austrians and Germans.