Sniffing Out the Stinkers as Well as the Sweet Deals

Pay attention this week to offerings, especially since next week is an IPO ghost town.
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Is anybody ready for a break? I certainly am, and it looks like we'll be getting one very soon. As you can see, this week is stacked to the rafters with deals. Next week, however, is a ghost town! I'm looking forward to a few days of sleeping in and playing Hot Wheels with my son. If I'm real lucky, and it doesn't snow, I may even get to log a few miles on that new Harley Road King that's been sitting in my garage gathering dust.

Looking at the IPO lineup this week, there are a few gems in the crowd, but there are also a couple of dogs. Anytime the calendar gets this hot, you can expect a few stinkers to get shuffled into the deck. Do not be fooled into thinking that every deal that gets priced will be a winner. Pay close attention and


those deals that are likely to cause pain and suffering. My job, by the way, is more than just pointing out the hot deals. I make it my business to steer readers away from anything that might burn them. In the long run this may be the most important thing that I do. So what should you


this week?

Join the discussion on

TSC Message Boards.

Take a look at

(BTBC:Nasdaq). I first read this filing back on Oct. 6, and rarely does this happen, but I laughed out loud! The people sitting around me thought I was nuts until I began to read aloud from the prospectus. Within a few lines I had them howling too.

This deal is a perfect example of an IPO that should not get done. Here is one statement taken directly from the filing that gave me trouble:

We began our commercial operations in September 1999 and have generated only nominal revenues to date. Because of this very limited operating history, there are no meaningful financial results which you can use to evaluate the merits of making an investment in us.

This is the first of a whole string of red flags that popped up as I read about this offering. Here is a company that has only been doing business since September seeking to raise capital and to list shares in the public markets. The frightening thing is that this IPO market is so hungry for deals, this one will most likely get done without any real thought given to the risks of investing in such an early-stage venture.

Should companies this young be allowed to float public offerings? I invite


readers to investigate this one for themselves, then write and tell me what you think.

You can find the filing on the

Edgar database

Let's look at the week ahead.

Ben Holmes is the founder of, a Boulder, Colo.-based research boutique specializing in the analysis of equity syndicate offerings. This column is not meant as investment advice; it is instead meant to provide insight into the methods of new and secondary offerings. Neither Holmes nor his firm has entered indications of interest in any of the companies discussed in this column. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Holmes appreciates your feedback at