The Risk of Controlling ShareholdersFor investors who may still be tempted to trade on the company's recent surge, Conolog appears to be an attractive play with momentum on its side thanks to the news releases. Share volume on Feb. 1 topped 21 million as the stock nearly doubled in price, compared to the 50-day average daily volume of only 700,000. But investing in a company with a controlling shareholder has its pitfalls, exemplified on a bigger scale by Revlon ( REV). A group of shareholders is suing 79% stakeholder Ron Perelman after the stock jumped after a surprisingly strong earnings announcement in October, just weeks after Perelman acquired nearly half the company's common shares in exchange for retiring a burdensome debt. The situation illustrates how controlling shareholders will usually get what they want, The Wall Street Journal opined this week.
The Pitfalls of Paid-For ResearchConolog also benefitted from a very bullish mention by a small-cap newsletter as it announced the share reoffering. Wall Street Grand argued that if Conolog "continues to make huge strides I wouldn't be surprised to see it become a takeover target at these current prices." "Another very bullish sign that
Cause for ConcernFor some investors, when insiders award themselves with shares only to dump them after a stock surge on paid-for research coverage, it can leave a bad taste in their mouths.
Please note that due to factors including low market capitalization and/or insufficient public float, we consider Conolog to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.