Zombie stocks: Speculators gamble in shares of dead co.

[MellowOne]

Zombie stocks: Speculators gamble in shares of dead companies

The prices of so-called bluepenny stocks rarely rise above a buck. That, plus the lure of familiar failures such as Washington Mutual and Lehman Brothers, make for a lively, if extremely risky, market.

By Ken Bensinger

September 23, 2009 | 10:40


Some of the most notorious names from the financial crisis have become the biggest winners in Wall Street's recent runup, with prices exploding after months of stagnation at the bottom of the market.

Though their share prices rarely crack $1, appetite for these so-called bluepenny stocks has soared. And precisely because the stocks are both cheap and very well known, they draw speculators eager to play off the potential for massive price swings in just a few minutes.

For those bold enough to trade in the zombie shares of otherwise deceased companies, this graveyard can be a gold mine:

* Shares in Washington Mutual, the failed savings and loan giant that was seized by federal regulators a year ago Saturday and sold to JP Morgan, hit their highest point since going under, closing up 64% on heavy trading, and driving its market capitalization over $600 million.

* Motors Liquidation Co., the shell of a company that holds all the assets General Motors dumped in bankruptcy court, more than doubled in price in early August and has remained high despite repeated warnings from regulators and company officials that it has "no value."

http://www.latimes.com/business/la-fi-bankrupt-stocks24-2009sep24,0,7510369.story

[Ian David]

1. I wonder how much my shares of Eastern Airlines are worth? n/t

[AdHocSolver]

2. This goes to show that the stock market is separate from the REAL economy. n/t