Some Tarnished Pennies

No investment was hotter in 1980 than the so-called penny stocks--speculative shares in new companies priced at $1 or less and traded primarily over the counter in places such as Denver or Salt Lake City. Suddenly, though, the pennies have tarnished. High-interest rates now make other investments more attractive, and many investors have grown suspicious about the low-priced stocks.

Faced with heavy losses on those issues, three brokerage houses specializing in underwriting or trading penny stocks have been forced to close their doors within the past five weeks. Jerome Wenger, publisher of Penny Stock Newsletter, predicts that perhaps six more brokers will soon go out of business.

Moreover, scandal has tainted the bustling Denver penny market. Civil or criminal fraud charges have been filed against three brokerage houses and executives in two other firms. In one case, the Securities and Exchange Commission and a grand jury have charged brokers at Investment Bankers Inc. with illegally manipulating the stock of Denver's Chipola Oil Corp. They allegedly gained control of a majority of the publicly issued Chipola shares and artificially inflated the price, from 19-c- to $1.

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