Confusion Causes 12,000% Run Up In Riviera Tools Company
Summary
- Tesla announces acquisition of Riviera Tools in Michigan.
- Riviera Tools is actually Riviera Tools Acquisition, LLC.
- Stock traders buy defunct Riviera Tool Company.
News of Tesla's acquisition of a Michigan-based auto supplier caused a great deal of confusion today. When Tesla (TSLA) announced that they had purchased Riviera Tools for an undisclosed amount, shares of Pink Sheet delinquent filer Riviera Tools Company (OTC:RIVT) were worth about 1/2 of 1 penny per share. By lunchtime, these shares were worth 60 cents each as penny stock traders spread the news that Tesla had acquired the company. Who could blame them? The companies seemingly shared an address. However, a little due diligence would reveal that while the 2 entities might have appeared on the surface to be one and the same, the fact of the matter is that one will become a part of Tesla and the other will, well ... we shall see how it turns out.
The confusion begins when you realize that RIVT is Riviera Tools Company, which at one time was what is now Riviera Tools, LLC. Here is how one became the other:
Riviera Tools Company used to trade on the AMEX in the mid-2000s. During this time, they entered into a financing agreement with Laurus Master Fund, Ltd.
In 2007, Laurus would foreclose on the assets and intellectual property of RIVT.
Pursuant to the foreclosure proceedings, in accordance with the
Uniform Commercial Code, the company was released from certain
indebtedness to Laurus in exchange for the surrender of the
company's assets and intellectual property securing its
obligations under the credit agreement.As a result of the Foreclosure Agreement, the company has no remaining operations and a de minimus amount of cash.
The company said that after the foreclosure, Laurus sold the
assets and intellectual property in an arms-length transaction to a privately held North American company, Riviera Tool LLC doing business in Michigan as Riviera Tool Acquisition LLC.The new owner intends to operate the company at its current facility in Grand Rapids. The majority of the company's 68 employees will be offered employment with the new owner.
As a result of the foreclosure, Riviera Tools Acquisition, LLC was formed and the assets of RIVT were transferred to it, leaving RIVT stockholders with what would amount to a shell without operations.
According to Michigan state filings, Riviera Tools Company would be dissolved in 2009, and as a result, the price of RIVT stock eventually went below a penny.
Enter the confusion.
When Tesla announced the acquisition of Riviera Tools in Michigan, traders were unaware that Riviera Tools Acquisition, LLC was operating with a True Name of Riviera Tools, LLC. You can see the state filing here.
Consequently, people began to buy stock in Riviera Tools Company , and the push was propelled by news bots that were picking up the news and rehashing it all over the place. The problem is that nobody bothered to check whether or not Tesla had acquired RIVT or another company with a similar name.
The result? A 12,000% increase in the price of what is essentially a defunct shell.
Shares of RIVT closed at $.225, well off the highs of the day, but still up a whopping 4,400%.
Tomorrow could be a sobering day for many traders as they realize that they quite possibly are holding what are essentially close-to-worthless shares in a defunct, non-reporting, Pink Sheet shell.
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Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.