Cats and Dogs

What Are Cats and Dogs?

"Cats and dogs" allude to speculative stocks of companies that might be participated in problematic business rehearses. Such shares are frequently traded over-the-counter (OTC) and are subject to limited oversight by regulators. Thusly, investors in such companies might be at a raised risk of fraud.

The beginnings of the term might lie in the utilization of "canine" to allude to a [underperforming](/fail to meet expectations) stock. The phrase is many times utilized in bull markets to mean that buying activity has become speculative, as in "everything is going up, even the cats and dogs."

Grasping Cats and Dogs

Cats and dogs are speculative shares, and frequently the subject of bits of gossip about fraud, bad behavior, or malfeasance among company managers or directors. They're many times trade as penny stocks, which are shares of firms with small market capitalizations and limited trading volume that trade over-the-counter (OTC) rather than on a traditional exchange.

They're frequently are traded on alleged pink sheets. Not at all like major exchanges, pink sheets have limited financial reporting requirements, which builds the risk of fraud. In any case, authentic companies trade on pink sheets, too, so investors need to research companies completely.

Investors might battle to find opportune and solid data cats and dogs, in light of the fact that, dissimilar to larger firms, they don't receive similar examination from regulators like the Securities and Exchange Commission (SEC).

The SEC, which oversees publicly traded companies, just gets financial filings from companies with over $10 million in assets and something like 500 registered shareholders. Smaller companies can therefore try not to enlist their financial statements with the SEC, making it more straightforward for corrupt companies to deceive investors with false data.

Notwithstanding "cats and dogs" alluding to a type of stock, the financial world purposes creatures in a large group of terms. The two most common are bulls and bears, signaling stocks that are ready for growth or decline, separately, and those traders that invest in them thusly. Other creatures incorporate bunnies, turtles, sheep, pigs, ostriches, chickens, stags, and wolves.

Cats and Dogs and Pump-and-Dumps

One dangerous fraud is the pump and dump scheme. In it, the culprits distribute overly hopeful or misdirecting claims about a company's possibilities utilizing online visit gatherings, social media, email, news releases, and other forms of communication.

They aim to "pump" up excitement for the security, getting buyers who bid up the stock price. Generally, these schemes are centered around meagerly traded OTC companies whose price might swing in view of small measures of buying.

At the point when new investors come in and raise the stock price, the culprits of the scheme "dump" their shares and lock in a gain. The new investors, as far as it matters for them, may face large or total losses.

True Example

In 2005, a pump and dump scheme was carried out including the Nevada-based shell company, VMT Scientific. The pumpers scheme bought the company, and covered their ownership by transferring their shares to offshore brokerage accounts. They advanced the company online and through news releases, giving a series of false claims about a claimed "leap forward" medical product supposedly fit for diminishing the risk of removals connected with diabetes.

Investors raced to buy shares in VMT, and the price spiked. The fraudsters dumped their shares for a gain of nearly $1 million. There was no such thing as in reality, the supposed product, the company was under court custody, with neither revenue or operations.

Features

• "Cats and dogs" alludes to stocks of companies that take part in obscure business rehearses and are traded on a speculative basis.
• Cats and dogs are in many cases penny stocks — shares of companies with small market covers and limited trading volumes.
• They commonly trade over-the-counter (OTC) absent a lot of regulatory oversight.
• They're frequently subjected to unlawful "pump-and-dump" schemes, by which the stock is supported by trader gab before being sold by the culprits who lock in a profit.