Fuchs: Why do we write about Pink Sheet companies?

TheStreet.com columnist Marek Fuchs wonders why financial journalists continue to write about companies whose stock is traded on the bulletin boards. However, he pointed out three recent examples of such stories that were good financial journalism.

Fuchs wrote, “Admittedly, the temptation to buy a Pink Sheet stock is sometimes great, especially because Pink Sheet companies, often operating under the shell of a failed enterprise, have a way of worming their way into businesses that are very much in the news: ethanol, China, commodities like diamonds.

“This, unfortunately, feeds right in to what piques journalistic interest the most: What is current and of precise public interest at that very moment in history? In fields other than finance, writing breathlessly about what is momentarily hot does little damage. But here, investors ultimately lose money because what is hot rarely remains so — especially in the hands of Pink Sheet companies, where profits are harder to come by than press releases filled with promise. Even when business journalists are just talking up an industry — not necessarily a specific company — the Pink Sheet company rises by taking advantage of the reflected glory.

“Take ethanol … please.

“The Business Press Maven, as you know, was profoundly troubled earlier this year by the overwhelmingly positive coverage given the near-term prospect of ethanol and any company that was peddling it.”

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