Call it chasing rainbows, an everyday occurrence on Wall Street, as thousands of impressionable investors take a flier on some cheapie stock in the hopes it will soon get expensive. For most, though, it’s a painful, money-losing experience when that supposed pot of gold at the end of the rainbow invariably turns out to be fool’s gold. But still they chase the rainbows.

An example of this folly is the recent pursuit of an over-the-counter cheapie, an unprofitable corporate pipsqueak, Synergy Brands, whose shares shot up late last year about 290% in 11 days – from a close of $1.83 on November 4 on a volume of 1,400 shares to an intra-day high of $7.25 on November 15 on a hefty turnover of 3,863,500 shares and an actual close that day of $5.25.

The ballooning stock price reflected a November 12 announcement that Synergy Brands’ e-commerce sites had been selected by prominent search engine Google as a cigar merchant on its new shopping engine, www.Froogle.com.

No doubt caught up with the tremendous success of Google, one of 2004’s hottest initial public offering, many unwitting investors undoubtedly figured they had a similar shot with Synergy, a holding company that posted 2004 revenues of $56 million and operates principally in the wholesale and Internet distribution of consumer goods, notably groceries and health and beauty aids, as well as cigars.

With the shares of Synergy, which was on the verge of bankruptcy five years ago, having dropped dramatically from their recent high despite being pushed by some Internet touts – the stock is currently trading at around $2.55 – many rainbow-chasers are sitting with some sizeable losses.

Commenting on the stock’s big rise spurred, in part, by a relatively small 3 million shares outstanding Synergy Brands’ CEO and chairman Mair Faibish describes it as “an irrational reaction” he couldn’t explain.

Based on what he told me, the irrational description seems to make a lot of sense. For starters, he said the company – which has yet to disclose its full 2004 results – will report a loss for the year of between $1 million and $2 million. Further, the deal with Google will hardly be a bonanza for the company. For example, without the Google link, cigars last year, about 4% of sales, ran $2.4 million. This year, Mr. Faibish figures, cigar sales with Google should run about $2.8 million.

After the announcement of the Google deal, some Synergy Brands touts howled that the company could earn as much as $0.40 a share in 2005 and $0.90 in 2006. Forget it; that’s strictly hype! Mr. Faibish’s outlook: A profit will be tough this year, although he expects positive cash flow. He does, however, look for a profit in 2006.

Meanwhile, Mr. Faibish tells me, exploratory discussions are in the works with two leading Internet merchants – namely Amazon.com and Overstock.com – that could expand the company’s online relationships. In both cases, talks involve the two Web sites adding Synergy Brands’ cigars to their online offerings.

The “icing on the cake” for the company, as Mr. Faibish sees it, is the possible acquisition of Perx.com, an online discount travel service for airline employees that earned $1.3 million last year and is 21.5% owned by Synergy Brands. He tells me talks are under way to acquire the remaining 79.5% on the basis of a stock swap, but there has been no agreement on valuation. “If we’re able to pull it off, we’ll see a company valuation that we’ve never seen before,” Mr. Faibish said.

So, is Synergy Brands a pot of gold at the end of the rainbow? It doesn’t appear so, but who can say? For sure, though, investors dumb enough to have anted up $7.25 for the stock who are now sitting with a loss of more than 60% on their money, wish they never heard of the company. No doubt, too, they’ve sworn off rainbows – that is, until they hear about the next one.

Meanwhile, not everyone lost money on the sharp sell off in the company’s stock. One short seller (a bettor on falling stock prices) tells me he sold short almost 35,000 shares from the high $5s to the mid-$6s and cleaned up after they went into a tailspin. “I hope you write something positive,” he said.

“I’d love a second chance.”