EMEX - reprint of a great post by Emaroh, member of the
POSALERT Club
I recently saw an interview with the president of one of the firms that do private placements. He said that he was aware of the risks of the company going belly-up, but he said he could make money either way. He shorts the shares and makes money if the company goes bk, or he would have shares of a viable company if it turned itself around.
So your question should really be: "Are there VCs willing to buy EMEX stock knowing that it can profit handsomely whatever happens to EMEX?"
The answer is "yes." We saw it with PERL about a year and a half ago, and we saw it with ADSP about a year ago. And the higher EMEX goes, the more attractive it is to a private placee. EMEX closed Friday at 22. Most reasonable souls agree that it's worth about $1.50 based on its fundamentals. If a private placee buys, say 2 million shares at something around $2.50, EMEX can crow that it got a cash infusion of $5 million and the innocent investing public will rush to buy more shares, driving the price up even more. Meanwhile, the PP is shorting through intermediaries or shorting naked through offshore accounts.
EMEX may try to go for a bigger amount because it says that its fuel conversion plants cost $20 million each. EMEX's 10KSB dated 4/17/01 says: "The Company has accepted a proposal from a financial institution to syndicate a combined debt and equity financing of $100 million to finance the construction of a 2,500 barrel a day plant consisting of five 500 barrel a day plant modules." (It goes on to say that there is no guarantee that the syndicate will be successfully concluded.)
So what is the plan? I'd say you're probably right in your conjecture that EMEX is trying to push the price up to make a private placement more attractive.
I wonder if they really have the technology to convert natural gas to deisel fuel and, if so, why are they building mini plants when economies of scale favor large plants? Another point, If they can do deisel, they could also do gasoline, which is much more in demand (and probably more profitable) than deisel. So why aren't they shouting about how they can produce gasoline AND deisel to help with the energy crunch that's bound to come this summer? When you read their SEC filings, you get the very distinct impression that they have an interest in anything related to industry and are not focused on a single technology. That is a pretty good sign that they have no business plan.
My guess is that they're still a long way from bringing any of these technologies to market. So the way to make money is to fleece the investing public. I can see EMEX easily going to 25 before it starts to weaken. Be careful.
Many thanks Emaroh
Michail |
