Is It Really Not Wise to Invest in Cats and Dogs Securities?

Cats and dogs: What does it mean?

What do you think about upon hearing the term “cats and dogs?” Most would think about the idiom about heavy rain. However, it is quite different in investments. Some may say it came from the phrase “everything is rising, even the cats and dogs” during a bull market, and the buying activity became too speculative. They took the “dog” in that phrase representing the underperforming stock and applied it to “cats and dogs.” These are companies’ speculative stocks that may be involved in shady business practices. One usually can encounter them over-the-counter, and regulators rarely oversee them.

If we say cats and dogs in trading and investments, we talk about speculative shares that are most likely subjects of rumors and wrongdoing among managers and heads. They are often traded as penny stocks, which are shares with minimal market capitalizations and trading volume. Instead of the typical exchanges that we know, one can trade them over the counter. Aside from that, one can also trade them on pink sheets. Pink sheets do not require many financial reports, unlike major exchanges. While we can say that it is easier for fraudulent acts to penetrate the pink sheet system, some legitimate companies still trade there. So, you can always trade on pink sheets. However, you should double-check and research thoroughly before acting.

Where can I get information about cats and dogs?

We say that one should always research thoroughly, but where can we get that information? That is the thing. It is quite a challenge to look for information about cats and dogs because they do not get similar scrutiny from regulators like the SEC. The Securities and Exchange Commission is the body that oversees publicly traded companies. It only accepts filing companies with assets beyond $10 million and a minimum of 500 registered holders. The SEC cannot oversee what happens with smaller companies. Hence, they can avoid registering their financial statements, and it is easier for them to mislead investors with false information.

Beware of another scheme.

While cats and dogs seem sketchy and questionable, one scheme that you should really be aware of is the pump and dump. People involved in the scheme may spread dramatically optimistic and misleading claims about a company’s prospects through social media, chat groups, email, news releases, and other communication channels. Technology made it easier for frauds and scammers to spread the word. They pump the excitement for the security so they can have more buyers bidding up the stock price. This scheme is more on thinly traded OTC companies with price swings depending on small buying amounts. As soon as new investors increase the stock price, the perpetrators will dump their shares. Later, they know that they have secured their gains. Unfortunately, those new investors will incur a massive or even a total loss in this case. So, it is essential for traders always to research and double-check the company and the securities being offered before making decisions.