SEC Suspends Trading of Coelco Stock Until May 2
The Securities and Exchange Commission has temporarily suspended trading in the stock of Coelco Ltd., a diversified Fountain Valley Co. that has been on a yearlong acquisition binge.
SEC officials said the suspension, which lasts until May 2, was ordered primarily so that brokers and prospective purchasers of Coelco stock would take a hard look at the company.
“We don’t think there is current, accurate financial information out about the company,” said Irving Einhorn, the Los Angeles regional administrator of the SEC.
He said the SEC is concerned that Coelco is overstating the value of the companies it has acquired.
Trade in the company’s stock was halted Tuesday, when it was selling for about 50 cents a share, up from 1 cent a share when the company started selling its stock on the open market last July.
Currently, Coelco has 17.5 million shares of common stock outstanding. According to the company’s estimate, the shares are held by about 1,600 stockholders.
Company’s Actions Defended
Coelco President David Sterns on Thursday downplayed the significance of the SEC action. He contended that when the company brings its accounting procedures into compliance with SEC standards, Coelco’s financial picture will match its portrayal in records the firm already has filed with the SEC.
“I feel Coelco’s story has been honestly told,” Sterns said.
But Einhorn said the SEC “rarely suspends trade. It is something we do because we are alarmed.”
Einhorn said he could not discuss specific cases but added that the SEC “normally” conducts a follow-up investigation of any company involved in a suspension.
After trading of Coelco stock resumes next week, Einhorn added, those who buy and sell the stock will do so “at their risk.”
Accounting Questioned
Einhorn said the federal agency is concerned about “the accuracy and adequacy of financial information” Coelco has issued to the marketplace.
More specifically, he said, the SEC questions the methods that Coelco has used to determine the values of the assets of firms it has acquired. There are inconsistencies, he said, in information contained in the documents Coelco has filed with the SEC and in data the company has provided to brokers.
Until last May, Sterns said, Coelco essentially was a shell company with 800 shareholders but no assets or earnings. Since then, it has acquired 11 diverse small companies with assets that Coelco says are worth more than $10.9 million. Coelco finances the acquisitions in large part by issuing new shares that it then exchanges for the stock of other firms.
