Legal Definitions - cats and dogs

The term "cats and dogs" is a slang expression used in the financial industry to describe certain types of investments, particularly stocks, that are generally viewed with skepticism or disdain by serious investors. It refers to securities that fall into one of two main categories:

• Nonperforming Securities: These are investments that have lost significant value, are not generating any returns, and show little to no prospect of recovery or future growth.
• Highly Speculative Securities: These are investments that carry an extremely high degree of risk. Their value is often based on uncertain future events, unproven business models, or hype, making them prone to substantial losses, even if they offer the potential for high returns.

Essentially, "cats and dogs" are investments that are often low-priced, have questionable underlying value, and are considered either financially distressed or excessively risky.

Examples:

• Example 1: The Failing Renewable Energy Startup
  A small startup company entered the renewable energy sector with a promising new technology, but after several years, its product failed to achieve commercial viability due to technical challenges and intense competition. The company's stock, which once generated excitement, has now plummeted to a fraction of its initial offering price, and analysts see no clear path to profitability or market adoption.

  Explanation: This stock would be considered a "cat and dog" because it represents a nonperforming security. It has lost substantial value, and there is little expectation of it generating future returns or recovering its former price, making it a poor and likely worthless investment.

• Example 2: The Experimental Space Tourism Venture
  An ambitious new company aims to offer suborbital space tourism, but its technology is still in the very early development stages, and it faces immense regulatory hurdles and engineering challenges. The company has no current revenue, and its stock price is driven purely by investor enthusiasm for the long-term potential of space travel, with no guarantee of success.

  Explanation: Investors might label this company's stock as "cats and dogs" because it is a highly speculative security. Its value is entirely dependent on the successful development and commercialization of an unproven technology in a nascent industry, carrying an extremely high risk of complete loss.

• Example 3: The Scandal-Plagued Pharmaceutical Company
  A pharmaceutical company, once a market leader, has been embroiled in multiple lawsuits over product safety, faced massive fines, and had several key drug candidates fail in clinical trials. Its stock has been delisted from major exchanges and now trades over-the-counter for fractions of a dollar, with many investors having abandoned hope of any recovery.

  Explanation: The shares of this pharmaceutical company are "cats and dogs" because they are both nonperforming and essentially worthless. The company's severe legal and operational troubles have decimated its value, offering no prospect of return for shareholders.