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Fool.com: LinuxOne: The Beauty of a Bad Example

Jan 07, 2000, 07:11 (3 Talkback[s])
(Other stories by Rob Landley)

[ Thanks to Linus Ivestor for this link. ]

"There's nothing quite as instructive as a really BAD example. So let's take a break from talking about great companies -- potential new Rule Makers -- to remind ourselves of how bad it can get if we don't do our homework. Let's refresh our sense of skepticism with a close look at a soon-to-be-public company I mentioned last week: LinuxOne."

"On September 22 of last year, shortly after Red Hat's (Nasdaq: RHAT) spectacular first day in the market, LinuxOne filed for an initial public offering (IPO) with an S-1 statement almost word for word identical to Red Hat's. The only difference was that LinuxOne had no earnings -- literally $0.00. It had no INCOME. It had never sold a product. It had only incorporated (in Nevada, a state with no disclosure requirements) a few months earlier. The company's entire assets on the S-1 consisted of about $150,000 cash (from their president buying stock in his own company) and a little under $5,000 of equipment (mostly their Web server). This was listed in dollars, not in thousands as is customary, apparently to make it look bigger."

"The president of the company, Wun C. Chiou, left his previous position as president of NetUSA (OTC: NTSA) in March to found LinuxOne. NetUSA is a penny stock traded over the counter that issues unsolicited commercial email (i.e., spam) to advertise its products."

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