Floyd Norris writing at Economix:
Etch A Sketch, a toy known to generations of children, makes it easy to wipe away the past. There is an investor who might wish he or she could use it to void a trade made Thursday.
Ohio Art, the maker of Etch A Sketch, used to be a public company, but it took advantage of a provision in the law to force most public shareholders to go away. Now it rarely trades on the over-the-counter market, and it no longer files public disclosures with the Securities and Exchange Commission.
On Thursday, the day after an aide to Mitt Romney referred to Etch A Sketch in what was widely viewed as a gaffe, the stock traded for its highest price in eight years. It is at least possible that the buyer did not understand how rare that was — or what a high price he or she was paying.
The bid-asked spread on Ohio Art on Thursday morning was $4-$12.50, meaning that a market maker stood ready to buy shares at $4 or sell them at $12.50, more than three times as much. An investor placing a market order to buy shares would have to pay the $12.50. And someone did. A sale of 500 shares at $12.50 crossed the tape at 9:30 a.m., as the market opened.
The last time Ohio Art shares traded that high was on Jan. 13, 2004, more than a year before the company’s chairman, William C. Killgallon, moved to remove the company from S.E.C. jurisdiction. He did that by offering to purchase all shares held by persons who owned 99 or fewer shares, at a price of $9.20. When that was completed, the company said it had fewer than 300 shareholders of record, and therefore could withdraw its registration....MORE