Converted Organics: Greed, Fear and Greater Fools

| About: Finjan Holdings, (FNJN)

I have referred to "greater fools" and the term "hope a dope" a couple of times and the company Converted Organics (Pending:COIN) is a perfect example of what I was talking about.

I came across Converted Organics on a day trading stock blog a few weeks ago and I have been following the stock out of curiosity. The stock price of Converted Organics has risen from around two dollars to the current price of $16.59 in the past half year. I am not sure what initially caused the stock price to surge but the stock price has continued to go up on sheer speculation.

Essentially people are buying the stock and hoping other fools will continue to buy the stock and send the share price up. The only thing Converted Organics has going for it is the company has an extremely low float (number of tradable shares). That is the major reason speculators have been able to manipulate the share price up.

However, there are a bunch of warrants outstanding that are quickly being converted to shares and increasing the float. This isn't good news for the people gambling in this stock.

At some point greed is going to turn into fear and the stock price is going to crash. I did a quick check for the fundamentals of COIN and I found that the company doesn't have any. The first quarterly report I came across on the company's website was from Nov 13, 2007 and it showed the company has no revenue! It's simply amazing that people have been buying this stock.

If you are a risk taker you could potentially score a huge gain shorting this stock. The risky part is that the idiots who have been buying this stock may continue to do so. However, this stock could also lose half its value or more in one day when panic selling sets in. It will be interesting to watch what happens.

Disclaimer: I have no position in COIN.

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