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The 5 Dumbest Things on Wall Street This Week: June 21

3. Oy Vey Orchard

Note to all those investors who scooped up Orchard Supply Hardware Stores (OSH - Get Report) stock based solely on Monday's headlines that Lowe's (LOW) was purchasing the bankrupt retailer: Next time take Paul Harvey's advice and stick around for the rest of the story!

Shares of Orchard popped 30% Monday, rising close to $2.50 per share, after a number of financial Web sites -- including TheStreet's -- blasted headlines saying that Lowe's was buying California-based hardware seller. The WSJ, for example, topped its story with "Lowe's Agrees to Buy West Coast Hardware Chain," while the Motley Fool ran with "Lowe's Seeks to Acquire Orchard Supply Hardware for $205 Million." As for the newswires, AP went with "Lowe's offers to buy Orchard Supply for $205M" and Reuters trumpeted "Orchard Supply files for bankruptcy, Lowe's steps in".

As for TheStreet's headlines, we had a few including "Lowe's Looks to Improve, Picks Orchard" and from our partners at The Deal, "Orchard Supply Tumbles on Bankruptcy Sale to Lowe's".

Based on these headlines, it's not hard to understand why long-suffering Orchard investors would believe they finally got a break. Had they bothered to read a little deeper into any those columns, however, they would have realized that Orchard was filing for Chapter 11 bankruptcy protection and Lowe's is serving as a "stalking horse bidder" to buy its assets at an auction to be held on June 27. (Actually, Lowe's could actually lose Orchard to another bidder at that auction, but we highly doubt it.)

In other words, the stock is going to become totally worthless, despite Monday's headline hullabaloo. Nada. Zippo. Zilch. Bupkus.

That reality clearly started to sink in on Tuesday when the shares slipped below $2. Nevertheless, the company still felt the need to clarify things on Wednesday, so it put out a press release telling overexcited investors to steer clear of its shares.

"Stockholders of a company in Chapter 11 generally receive value only if all claims of the company's secured and unsecured creditors are fully satisfied. In this case, Orchard's management strongly believes that it is highly unlikely all such claims will be fully satisfied. Accordingly, it is expected that the Company's equity holders will experience a complete loss of their investment as a result of Orchard's Chapter 11 bankruptcy proceedings," stated Orchard.

Orchard's statement sent the stock down 60% Wednesday to 70 cents.

There you have it Dumbest fans, the rest of the story.

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