Zombie Ticker Mistaken for Twitter, Is Halted by FINRA

Securities Lawyer 101 Blog

Sometimes dormant stocks—often called Zombie Tickers—run for no reason at all, but when Tweeter Home Entertainment Group took off on October 4, 2013, there was an obvious explanation:  the company’s stock symbol is TWTR.  TWTRQ, to be more exact, the company went bankrupt in 2007, and hasn’t reported to the Securities and Exchange Commission (“SEC”) since then.

The day before, Twitter, Inc. filed a Form S-1 registration statement with the Securities and Exchange Commission (“SEC”) announcing the details of its initial public offering (“IPO”).  On the first page of the prospectus it was disclosed that the company’s ticker will be TWTR when it begins trading on the Nasdaq.

The Twitter IPO

On the morning of the 4th, some investors, evidently unaware that Twitter’s IPO has not yet been launched, and equally unaware that a “Q” ticker suffix indicates bankruptcy, jumped on the stock, driving it to gains greater than 1400% before stock price fell back on profit-taking.

Volume was the highest the stock had seen since 2007.  TWTRQ closed at $0.0065 on the 3rd; on the 4th, it reached an intraday high of $0.15.

The fun didn’t last long.  At 12:43 p.m., the Financial Industry Regulatory Authority (“FINRA”) imposed a U-3 trading halt, and the action stopped abruptly.  FINRA had the authority to do so because it oversees and regulates trading in over-the-counter issues.  A U-3 halt is an “extraordinary event halt,” so called because “FINRA has determined that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the OTC Equity Security… or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process.”

U-3 halts may last up to ten days, but if it wishes, FINRA can extend them for additional ten day periods.  Earlier in the year, Eco-Trade Corp (BOPT) was halted in the same way, though evidently for different reasons.  FINRA offers no official explanation of these actions, but does make an announcement when trading is about to resume.  Upon resumption of trading, the stock will reopen on the Grey Market, because it has lost compliance with Rule 15c2-11.  The company must then find a sponsoring market maker willing to file a Form 211 with FINRA so that the stock may once again trade as a Pink or a fully-reporting issuer on a higher OTCMarkets tier.

 That will not occur with TWTRQ.  The company is long dead.  It seems likely that at some point the SEC—whose activity is currently curtailed by the government shutdown—will bring an administrative proceeding to revoke the stock’s registration.  Should that happen, the troublesome ticker will disappear, along with Tweeter Home Entertainment’s public company status.  Since FINRA can keep the halt in place as long as it likes, it seems possible that TWTRQ will never trade again.

In the meanwhile, those who were caught without a chair when the music stopped will perhaps learn that it’s best to research an investment before clicking the “buy” button.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855