FINANCIAL HOUSEKEEPING | Beware oil and gas investment fraud
With the energy patch having been one of the strongest sectors in investing for the past few years, frauds based on oil and gas investing have been on the rise.
The North American Securities Administrators Association has issued an “investor alert,” suggesting that caution is important.
While acknowledging that the vast majority of energy investments are legitimate, the securities administrators group warned that investors can’t assume that they’re not being scammed when looking at an energy limited partnership or at interest in an oil-well lease.
To that end, consumers considering the purchase of alternative energy investments (rather than oil and gas stocks traded on a recognized exchange) may want to check out the investor alert, which is available at the association’s website, www.nasaa.org.
SHORT COURSE | Debt-equity swap
A debt-equity swap is a deal in which a corporation exchanges existing bonds (debt) for newly issued stock (equity). Typically, this kind of move allows a company that is in financial trouble to cancel some of its outstanding debt by trading shares for the bonds.
For example, XYZ Co. can eliminate some of its debt – removing that negative from its balance sheet – by transferring the equivalent balance to equity.
Some companies may take advantage of the debt-equity swap process during times when their share price is high, allowing them to trade more debt for fewer shares of stock.
