Riviera Tool Company (OTCMKTS:RIVT) Halted by FINRA
Would you invest your money in a thinly traded OTC company that hasn’t filed any financial reports for more than eight years? No? Would you invest your money in a thinly traded OTC company that hasn’t filed any financial reports for eight years, but is about to be acquired by one of Wall Street’s darlings? You’re probably tempted. But will it be a good call? Riviera Tool Company (OTCMKTS:RIVT) showed us yesterday that it might not be.
A few minutes before the opening bell, several relatively popular news websites started saying that Tesla Motors Inc (NASDAQ:TSLA) has reached an agreement to acquire a small Grand Rapids, Michigan-based company called Riviera Tool LLC. Some of you might have already noticed the difference in the names – TSLA‘s acquisition target is called Riviera Tool LLC whereas the public OTC entity is called Riviera Tool Company. As we shall explain in a minute, this is a rather significant difference, but investors were simply too excited to care.
The story spread around like wildfire and people were scrambling to get their hands on as much RIVT shares as they can. The previously dormant ticker opened the day with a massive gap up at $0.027 per share (more than 430% above Wednesday’s close) and started running towards the higher end of the charts. A couple of hours later, it hit a high of $0.60 and although it failed to remain there for long, it still finished the day at more than $0.22 per share – a remarkable 4,400% above its previous value. The dollar volume at the end of the session stood at a mind-bending $3.6 million.
A lot of people put a lot of money on the line and they were confident that they have made the right decision. FINRA, however, tends to disagree.
After the closing bell, the Financial Industry Regulatory Authority issued a trade halt on RIVT. There’s no information on when (and if) the halt will be lifted and apparently, it was caused by an extraordinary event which, according to FINRA’s description, is an event that “has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process.” Not the most helpful of explanations, you have to agree, but we reckon that we know what the problem is.
If you open RIVT‘s latest press release from October 26, 2007, you’ll see that the assets that belonged to Riviera Tool Company were foreclosed by an entity called Laurus Master Fund Ltd after the pink sheet company defaulted on its loan agreements. The assets were then transferred over to a private enterprise called Riviera Tool LLC which, apparently, is still working at the facility that was once used by RIVT.
This is the private enterprise that, if the reports are correct, is about to become TSLA‘s first ever acquisition, and unfortunately, if you are holding RIVT shares at the moment, you don’t have a stake in it. Instead, you have a stake in a halted OTC company that has had no assets whatsoever for the last seven and a half years.
This goes to show that in Pennyland, every single word and letter counts. It also goes to show that doing your due diligence before putting any money on the line could save you an awful lot of headaches.
