Denver Pennies

Come on, big boy, 10-c- a chance

Wall Street disdains them as "penny" stocks, but some nervy investors are making big profits on bargain-basement high-flyers with names like Jade Petroleum and Oiltech. A share of Jade has jumped from 30-c- to $1.75 in six months, while Oiltech soared in two years from a dime to $2.50. These inflated pennies are coming from mile-high Denver, now the haven of the national over-the-counter market. In the past 15 months, more than 100 companies there have filed to go public or launched public equity offerings totaling an estimated $200 million.

Entrepreneurs have joined the skiers descending on Colorado, primarily because of the state's liberal corporate disclosure requirements. New energy companies, which are sprouting up in the gas-and oil-rich region like spring wild flowers, are attempting to turn oil leases into sizable fortunes. Their offering circulars detail risks that would daunt the faint of heart. Speculation also fits the local mood. Ever since gold-rush days, Colorado has been flush with get-rich-quick gambits, a mania seen in the uranium boom of the mid-1950s.

Energy issues have been the most successful Denver stocks. But the flourishing market has also drawn out the kooks and the cons. The inventor of a tennis racquet with adjustable tension that permits cannonball serves and puffball returns was unable to find anyone to underwrite his scheme. One of the top promoters behind Great Plains Mineral Byproducts Inc., which claimed to have a process for extracting gold, silver and platinum from the residue of burnt coal, turned out to have a record of three fraud convictions.

The Denver penny market has recently plunged up to 40% because of profit taking and fears over the $227 billion oil windfall profits tax that President Carter signed into law last week. But investments from such savvy money havens as New York, California and Europe continue to flow into Colorado. Says SEC Regional Administrator Robert Davenport: "The Denver market operates on the 'greater fool' theory. Irrespective of a company's merits, people will buy its stock because they reckon a bigger fool will come along later to buy it at a higher price."

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