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Aug 05

The market for penny stocks is rarely efficient: Jet.com vs Jetcom

With the news that Wal-Mart is looking to buy Jet.com coming out two days ago, some geniuses looked to buy Jet.com to profit from the potential buyout. The problem is that Jet.com is not publicly traded anywhere. However, they found Jetcom, which is publicly traded on the grey market OTC (so no bids or offers are shown and market makers can’t make a market).

A quick look at the description of Jetcom (JTCMF) on OTCmarkets.com shows that it is definitely not the same company as Jet.com: it is reported to have been founded in 1968 and had a market cap of about $2 million as of two days ago. The company’s website is also defunct (Jetcom.com), the company’s address is in Canada, and its business description is “communications and media – cable and entertainment.”

Still, this minimal amount of due diligence proved too much for many traders and at its peak today JTCMF was up 2000% at $2.00 per share, up from $0.10 three days ago. Unfortunately because it trades on the grey market I cannot short JTCMF at Interactive Brokers; otherwise I would have shorted it. This is not the first time something like this has happened and won’t be the last. The most recent similar situation was Riviera Tools (RIVT). During its dumb run trading in RIVT was suspended by the SEC so there is a good chance of that happening to JTCMF.

[Edit August 8th: I see now that JTCMF was halted shortly after I published this blog post at 11:55 AM on August 5th. Meanwhile, Wal-Mart (WMT) has confirmed that it is buying Jet.com for $3.3 billion]

Disclaimer: No position in any stock mentioned. I have no relationship with any parties mentioned above. This blog has a terms of use that is incorporated by reference into this post; you can find all my disclaimers and disclosures there as well.

 

2 comments

  1. Michael Goode

    Test

  2. Andrew

    Thank you, Michael Goode for this interesting information. No wonder, that 90% of traders have more losses than gains and ultimately blow up their account.

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