Pink sheet companies have always fascinated me. It’s this large universe of mostly very crappy companies that virtually all investors will not touch with a barge pole. Rightly so for the most part. I’d say at least 95% of them are not even remotely interesting. Many are just shell companies with no operations. Others are being used as a vehicle for pump and dump schemes in a hot sector; medical marijuana companies are a recent example among these.
The companies in the remaining few percent of the pink sheet universe can be absolutely fascinating though and there are certainly some great bargains among those. The most mysterious ones are companies that do not publish financials at all. They have “gone dark”. Investors have different definitions for the term going dark. To me it means a company that is deregistered from the SEC and that does not publish financials on their website.
Every once in a while I stumbled upon one of these dark companies and thought it looked interesting. For it to qualify as interesting it has to trade at a share price that is more than just fractions of a penny, which disqualifies probably a few thousand companies right of the bat. The company also has to be active in an industry that seems legitimate and somewhat understandable. A few years ago I started buying a single share in some of the ones that fascinated me. My hope was that I would receive some financial information from these companies that allowed me to make a more informed investment decision.
One of these companies was Temco Service Industries which traded on the pink sheets with the ticker TMCO. Temco offers facility support services. They can offer janitorial services for office buildings, but also more specialized services for schools and colleges where bacterial and dust particle counts are being made and analyzed.
I originally bought my share for a total cost of $38. Unfortunately I did not receive any information from Temco in the time I owned it. So the share just sat in my account for about one year. A few weeks ago I noticed that the bid price for the stock had suddenly jumped up to more than $50. I checked Temco’s website and found out the company was being acquired by Atalian International, a privately owned company from France that is active in the same industry. I e-mailed the company for some financial details about this transaction, but received no reply.
Friday I was cashed out of my share at a price of $59.72. So I made a whopping $21.72 on this one, but 57% certainly sounds a lot better in this case, so let’s use that instead. 🙂
This post serves as an example both to illustrate that there is apparently value out there among those mysterious dark companies and that the way I’ve been going about it investing in them up until now is probably not the way to do it. I’ve just sat around passively hoping to catch one or two companies that voluntarily mailed their shareholders financial information, but I have not received anything from the dark companies that I own just one, or a few shares of.
Perhaps it is still worth doing it this way, because my sample size is very small. I now think though that if you want to find out financial information about these companies, you will need to really pursue it. You will need to contact management, often by phone and try to get them to send you information. I think it might not even be worth doing from Europe where I’m situated, because the management can just keep stonewalling you. American shareholders can be more effective and make a stronger demand for information. With them the management has to be at least a little worried that they will use the court system to make a demand to get access to financial information of the company.
I do wonder if shareholders can share financial information about dark companies with other shareholders. I know there are situations where shareholders have to to sign a non-disclosure agreement (NDA) before they even get financial information from the company. But in conventional situations where one simply knows more than the other? I think US based investors have a much better chance of getting information from the management of dark companies than I do as a European. So I would be interested in sharing information with a small, private US based investor about some dark companies if it is legal to do so. Anyone have an idea if investors are allowed to share financial information in this way?