Ask TBC: Why are folks still buying shares in San Joaquin Bank's parent company?
| Thursday, Oct 22 2009 05:59 PM
Last Updated Friday, Oct 23 2009 03:24 PM
Q: Why are people still buying shares in failed San Joaquin Bank's parent company? Aren't they worthless?
-- Numerous callers and writers
A: We’ve also been mystified by the high volume of trading, especially after share prices plummeted 96 percent Monday (when markets reopened after Oct. 16’s bank failure).
Volume backed off from Monday's million-share day, but trading continued this week at unusually high levels. Share price has hovered around 9 cents since Monday, down from an all-time high in 2006 of more than $38.
Here's what Frank Colatruglio, a vice president at the Bakersfield office of UBS Financial Services Inc. and a chartered financial analyst, had to say.
"No one in their right mind would go anywhere near this," he said. "It's nothing you could in any way call investing."
But a special breed of folks dabble in this worse-than-speculative end of the market, where selling shares for, say, a penny more than you paid can bring rewards.
Since Monday, for example, share prices have ranged between 7.5 and 11 cents — “a huge spread,” Colatruglio said.
It's common to see dead or dying companies trading up until the bitter end. Even Gottschalks is still going, its penny-a-share price moving fractionally most days.
It's not clear yet how much the holding company, San Joaquin Bancorp, is worth on its own, but there's a chance it has enough assets to merit a 9-cent share price, he said.
Aside from who's buying, there's a reason folks are selling.
Investors might want to sell holdings to establish a capital loss before the stock is delisted, Colatruglio said.
"Once it becomes delisted -- which is going to happen -- you won't be able to sell," he said.
The loss can be used to offset gains from other holdings for tax purposes.
Investors who miss the window to sell shares still have options for claiming the loss, but the process is "a lot more messy," he said.
This is a bonus Ask The Californian. The feature usually runs on Thursdays and Mondays. Submit questions to asktbc@bakersfield.com or to The Bakersfield Californian, c/o Christine Bedell, P.O. Bin 440, Bakersfield, CA 93302.
