Part 2
>>Market Summary
>>Monday April 14 1986
>>On a decidedly less happy note, CHOPP COMPUTER sold off $3.63
>>to $11.63 on 213,000 shares. It is a tribute to the company's
>>market makers that the slide in price has been such an
>>orderly affair (although doubtless not what the shareholders
>>had in mind). The absence of margin calls is a sign of
>>stability in the Chopp market that many observers wouldn't
>>have expected. When twenty dollar stocks lose close to half
>>their value the result is usually a debacle.
>>
>>Market Summary
>>Tuesday May 6 1986
>>CHOPP COMPUTERS lost $.50 to $7.88 on volume of 87,000
>>shares. A recent news release outlines Chopp's schedule of
>>events at an upcoming national computer conference in Las
>>Vegas; it will be the company's first major exposure to the
>>supercomputer world.
>>
>>
>>Market Summary
>>Thursday May 22 1986
>>CHOPP COMPUTER
>>was steady at $8.37 ($50.22 pre-split) on volume of 23,000
>>shares. Chopp, its directors, and Mr. Frank Mathews have been
>>rudely attacked in the Superior Court of California by a
>>shareholder named Mr. Robert McGinnis. Mr. McGinnis' chief
>>gripe appears to be that a stock promotion is taking place;
>>he's very annoyed about the alleged use of celebrities' names
>>in connection with private placements. He also claims some
>>far-fetched happenings: he says that the Choppers had Chopp
>>issue to them (for little or no consideration) millions of
>>shares which they then re-distributed to U.S. shareholders in
>>violation of U.S. securities laws. Mr. McGinnis says that
>>they kept some of that money for themselves and returned some
>>to Chopp or Sullivan Computer Corp. The balance of the funds,
>>says Mr. McGinnis - five or ten million dollars - is
>>squirrelled away with a Vancouver brokerage firm where it is
>>used to manipulate and artificially maintain a high market
>>value for Chopp shares. The arithmetic used in calculating
>>shareholders' losses leads Mr. McGinnis to conclude (hope)
>>that treble damages from the Choppers could exceed $400
>>million. After his fuzzy recounting of events, Mr. McGinnis
>>gets to what he really wants, particularly: no more selling
>>or distributing Chopp shares in California until they are
>>qualified under California securities laws; and the return of
>>any trading profits made by the defendants. If nothing else,
>>the suit may have some nuisance value; the Choppers say none
>>of them have been served with the document yet. Suits of this
>>nature sometimes represent the activities of zealous
>>shortsellers.
>>
>>
>>Market Summary
>>Monday Jun 16 1986
>>Tuesday is the day that the VSE releases its weekly short
>>report.
>>A surprisingly small position, is CHOPP
>>COMPUTER with a modest 68,000 shares short. Considering how
>>controversial the company is, and how loudly the principals
>>holler about the shorts attacking them, it seems like a
>>relatively small position.
>>
>>Market Summary
>>Monday Aug 4 1986
>>On volume of 93,000 shares, $0.75 was chopped off the price
>>of CHOPP COMPUTERS, leaving it at $4.15. The VSE's most
>>controversial listing isn't being allowed a moment's peace by
>>the editors of The Durant Livermore Cutten Bliss Report.
>>There is now more news about Chopp from this source than
>>there is from the Choppers. In response to Chopp's threatened
>>legal action against what it described in its July 8 news
>>release as poison pen letters, the Durant Report has
>>thoughtfully offered to print, for the benefit of its
>>subscribers, any comments that the Choppers might have on
>>their reporting. Although the Choppers seem to have allowed
>>that opportunity to pass, the Durant Report reveals that on
>>June 21, 1986, they filed a complaint in California court
>>seeking to muzzle their noisy critic. They sought, in a 500
>>page complaint, a restraining order to prevent the Durant
>>Report from publishing information about Chopp. While the
>>Choppers complained that the Durant Report was wrecking their
>>chances of raising the money they need - presumably the
>>unhindered run from $0.17 to $120.00 (pre-split) wasn't
>>sufficient to facilitate financing - the Durant Report
>>claimed that (1) what it says is true, and (2) that it is
>>seeking to establish a reputation for itself "by being the
>>first to call public attention to the largest financial
>>swindle since Equity Funding." (No matter what your views of
>>the Chopp promotion are, the thinly veiled comparison with
>>Equity Funding seems both misleading and inflammatory to say
>>the least. Durant cagily avoids a direct comparison.) After
>>listening to the adversaries call each other names, Durant
>>says that the judge ruled that the Report was free to carry
>>on business as usual - which it did, by promptly comparing
>>Chopp's claims for producing a working model of its super
>>computer by the second quarter of this year (for $1.4
>>million) to those of a used car salesman who promises to
>>develop a new racing auto that would beat all competitors at
>>the next Grand Prix - to be delivered in one month, at a cost
>>of $9.95.
>>This is the fourth brief report we've had about the Choppers.
>>The first, under the headline "You've Come a Long Way, Baby",
>>was on February 17 when Chopp was $19.00; the second was on
>>April 7 at $13.00, and contemplated how the promotion might
>>end, pointing out the similarities to March Resources; the
>>third was May 23 at $8.37 and offered some details about a
>>$400 million lawsuit against the Choppers and Mr. Frank
>>Mathews; the fourth is today's update on the Durant Report's
>>escalating efforts to promote the price of the stock down.
>>We'd like to know what our readers think about the role of
>>the Durant Report in the Chopp promotion because it seems to
>>us to be particularly controversial - one group trying to
>>promote the stock up, another one trying to get it down. And
>>both using publicity tactics that are usually only employed
>>by the first group - letters to shareholders, newsletter
>>recommendations, etc. Please send your viewpoint to Letters
>>to the Editor at our mailing address. Durant, by the way, has
>>pulled out all the stops in its last letter. It does this by
>>discussing its overall philosophy in a paragraph that is
>>actually unrelated to Chopp. In the unrelated paragraph, it
>>allows as how it is unhappy about its clients referring to
>>its editors as "scambusters", and that contrary to some
>>reports, no criminal conduct is required before issuing a
>>short report. The insinuations must be obvious to even the
>>dimmest reader, and to our thinking are close to scandalous.
>>
>>Market Summary
>>Friday Sep 12 1986
>>And for the Choppers it was a good day for them too. Their
>>favourite company, CHOPP COMPUTER, has been enjoying a good
>>rally since it got the Durant Livermore Report off its back.
>>Today it was up $1.25 to $7.25 on volume of 140,000 shares.
>>The Durant Report - if anybody is unfamiliar with it - is as
>>keen on promoting the price of Chopp down as the Choppers are
>>of promoting it up, and has devoted several of its recent
>>issues to that end. Each side is wonderfully rude about the
>>other: insults galore and allegations of nuthin' there from
>>Durant - howls of protest from the Chopppers. Not
>>surprisingly, the shouting quickly moved into California
>>court where it seems the Choppers have (temporarily at least)
>>been able to gag their tormentor. One of the parties - we're
>>not sure which - sent us an enormous 500 page copy of the
>>court proceedings. Biggest news release we've ever had, and
>>interesting reading too. Thanks. Interestingly, a new
>>newsletter from the same part of California that Durant is
>>mailed from has appeared. It bears the title Air Stock Index
>>and - you guessed it - thinks selected issues are too high.
>>Chopp is not one of the companies that it refers to as air
>>stocks.
>>
>>Market Summary
>>Thursday Feb 23 1989
>>There seems to be a spot of trouble brewing. Though the VSE
>>index began our review week on a positive note - up three
>>points to 820 on volume of 15 million shares - all eyes were
>>focused on one stock going the other way.
>>\WCN Investment\ fell from $9.75 to $5.25, was halted, then
>>resumed trading and rallied its way back to a $6.50 close.
>>Or, for those who prefer to keep today's prices relative to
>>WCN's $0.35 public offering in 1986, (and ignore the six
>>splits), WCN fell from $58.50 to $31.50, was halted, then
>>resumed trading and rallied its way back to a $39.00 close.
>>That, coincidentally, is where WCN closed two weeks ago on
>>Friday, February 10. Then, we were wondering if the company
>>might soon be taking its place with the other members of the
>>VSE's over-fifty club - stocks that go past $50.00 - and if
>>it did, how might the VSE best be able to protect itself from
>>another potentially unhappy public relations experience. The
>>VSE's over-fifty club includes \March Resources\ which Mr
>>Frank Mathews and associates took to $60.00 in 1980, based on
>>a dry hole named The North Lost Soldier; \International
>>Tillex\, which Mr Sam Ford and associates took to $75.00 in
>>1986, based on a phony insurance deal; \Chopp Computer\ which
>>Messrs Frank Mathews and Donald Hutton took to $120.00 in
>>1986, based on a never-finished super computer; and \Skyhigh
>>Resources\, which Mr Donald Fraser took to $72.00 in 1986,
>>based on the never-completed Edgington Oil acquisition.
>>Each of these over-fifty stocks was an over-promotion that
>>has cost the Vancouver stock exchange and its members a
>>fortune in lost credibility and lost business. In fact, two
>>of them, International Tillex and Chopp, are still dragging
>>their way through the courts; and one - Chopp - has already
>>resulted in a decision against a brokerage, which, (unless
>>successfully appealed), could set a precedent that might
>>someday be used to bankrupt a VSE member and dig deep into
>>the brokers' contingency fund. (That decision awarded $36,000
>>to a client of McDermid St Lawrence who had not been made
>>fully aware of the risk she was taking buying Chopp Computer.
>>She was not given the negative information that was available
>>about the company.)
>>Because each of these four over-promoted stocks has cost the
>>VSE and its members many times more in negative publicity
>>than it generated in commissions, the pure dollar and cents
>>lesson ought to be: cool down the over-promotions. The
>>exchange need not destroy the promotion; nor need it hurt the
>>company (in fact it can help it); nor need it hurt the
>>shareholders (it can help them also). But the VSE should try
>>and protect itself from fallout from any future over-fifty
>>collapses. It can. The best way would be to see that the next
>>collapse does not have so far to fall, is less dramatic -
>>both on the upside as well as the downside - and is less of a
>>media event.
>>\WCN Investment\, being the only active member of the
>>over-fifty club, will have to be, as we said two weeks ago,
>>our example. Since then, WCN has not just become more
>>topical: it has become Vancouver's most topical. (This is not
>>a discussion about WCN's business; it is about volatile
>>stocks in general, and ones that passed $50.00 in
>>particular.)
>>As WCN roared past $50.00, the company found its affairs
>>featured prominently in both The Vancouver Sun and The Globe
>>and Mail; and other stories are probably coming. WCN's story,
>>which has political overtones, may still be building. By the
>>time it is old news, it will have as controversial a profile
>>as Chopp's but, unlike Chopp, a profile gained mid-promotion
>>rather than post-promotion. If worst comes to worst, and the
>>promotion runs into difficulty (pray it does not) there will
>>be no explaining WCN away as "something that happened three
>>years ago". Its affairs, business as well as promotional,
>>will go under a microscope.
>>All-in-all, these fifty dollar stocks have the potential to
>>pose problems for the VSE. Can these problems be avoided? We
>>think so. Let's see what happens on Monday.
>>
>>Market Summary
>>Friday Mar 17 1989
>>For the VSE and its members, the squeeze is on. During the
>>rest of 1989 they may find themselves trapped: from above, by
>>the fallout of exploding shells (see last night's CBC story
>>about Chopp Computer or The Fifth Estate's soon-to-be-aired
>>show about funny companies)
>>
>>Market Summary
>>Thursday Dec 28 1989
>> On January 19, Justice Kenneth
>>Meredith, in a precedent-setting court decision, ruled
>>against McDermid St Lawrence Ltd and Mr Kenneth Hope in the
>>Chopp Computer case, ordering them to shell out $35,000 to a
>>client who bought the stock in 1986. The implication for
>>broker-promoter relationship was ugly. The press had a
>>field-day.
>>
>>Market Summary
>>Wed 26 Jun 96
>>TEN YEARS AGO the indices disappeared in the excitement surrounding Howe
>>Street's entrants in the annual Nanaimo bathtub race, so we can go straight
>>to the rest of the CHOPP COMPUTER CORP debacle. (No, the Howe Streeters did
>>not win.) Before Ms Hutton spoke of her husband's appointment to the board,
>>and the $7-million scientific research tax credit financing, she had asked
>>the VSE to halt trading, and the exchange, as fond of halts then as now,
>>had done so. When she made those announcements she also said that the
>>company had closed the revamped 250,000 share private placement at $5.50 to
>>Randall Jackson, and arranged a public financing of at least 250,000 shares
>>through an undisclosed broker. The exchange, alert enough to recognize a
>>rigged deal, then said it would not reinstate trading until it had accepted
>>a statement of material facts for the offering.
>>Trading started again on July 2,1985, after acceptance of an SMF for at
>>least 250,000 shares at a minimum of $7 by Canarim Investment Corp. A
>>set-back at the end of July, when the VSE halted trading as the stock
>>plunged, (explained by Mr Hutton as being due to an imbalance of orders
>>caused primarily by stop-loss orders), gave him the opportunity to say
>>there were no material changes and no negative facts to disclose. The
>>design of the first working model was virtually complete and he expected to
>>have it to show to the world within the next nine months to a year. Mr.
>>Hutton did not mention that Baz originally said they would attempt to have
>>a working prototype within a year from the end of April.
>>The set-back was soon overcome, and early in August the shareholders
>>approved a three-for-one split, which gave the company an issued capital of
>>6,717,600 shares, with 2,250,000 of them in escrow. The public offering
>>closed in mid-August, not very successfully, as Canarim was able to sell
>>just 86,700 shares at an average price of $9.65 (pre-split). That bad news
>>was overcome by the good news of two more private placements, one of
>>300,000 post-split units at $4.08, the second of 450,000 units at $6.19
>>($18.57 pre-split), the latter announced in mid-September. The same
>>announcement saw the end of the scientific research financing, due to the
>>company's inability to satisfy certain conditions, but management was
>>satisfied that the two placements would provide enough money to pay for the
>>super-computer program.
>>The first of those two placements closed late in October, but only for
>>150,000 units, and the company never again mentioned the other. The rest of
>>the year saw a successful attempt to revive a flagging market with a
>>proposal to merge with its licensor, Sullivan Computer, and by early 1986
>>the shares were trading at $21.25 ($63.75 pre-split). The optimistic Mr
>>Hutton said he expected to have the working model completed in the second
>>quarter, and that he would have a product to sell by 1987, that would
>>immediately produce revenues and earnings.
>>Late in January Chopp split its shares again, this time two for one, and Mr
>>Hutton said that design improvements had increased the capacity of each
>>mode so much that if the first working model consisted of 20 modes, it
>>would have an effective speed of 1.6-billion instructions per second, 15
>>times the speed of the competitor Cray XMP. He also said all the legal and
>>tax problems relating to the merger were solved, that he expected it within
>>60 to 90 days, and that a Nasdaq listing would follow.
>>In mid-February, with the stock at $19 ($114 pre-splits), Ms Hutton
>>revealed that the 125,000 share private placement at $5.50 to Mr Jackson
>>had not closed, that the company had substituted a placement of 70,000
>>units at $11 in its place, and that the private placement purchaser of the
>>150,000 units at $4.08 had exercised its warrants. The VSE did not think
>>much of the proposed $11 (pre-split) price, but soon accepted an amended
>>price of $18.63. The lucky buyers, who got the equivalent of 140,000 units
>>at $9.32, when the stock was trading at $20.12, were Michelle Tomera, with
>>60,000, and Marlon and Carol Johnson, with 10,000.
>>The stock reached its high of $123 (pre-split) at the beginning of April,
>>and was at $114 on April 4 when Ms Hutton spoke glowingly of increased
>>credibility, recent technical advances, and the imminent arrival of a draft
>>merger proposal and a Nasdaq listing. She also said it was apparent from
>>her description of the advances that the company was involved in a very
>>complex project. She did mention a target date for a working model, and
>>that, plus the complexity, may have spooked the market, because for Chopp
>>it was then all downhill. In July, after two more trading halts when the
>>stock plunged, it traded at just $53.25 pre-split. Mr Hutton said he
>>expected Sullivan to complete one demonstration node of a proposed 16 node
>>machine by the end of the year, and issued a lengthy news release howling
>>about poison pen letters by The Durant Livermore Cutten & Bliss Reports,
>>from a post office box in the West Indies.
>>By August Chopp was down to $25.50, even though it had obtained an interim
>>injunction against the bad-mouthers. The stock bounced back to $63 in
>>September just before Sullivan filed its take over bid, offering four
>>Sullivan share for three Chopp. By mid-November more than 96 per-cent of
>>the shareholders had accepted the offer, and the VSE delisted Chopp, at the
>>company's request, on November 19, with the last trade in Vancouver at $54.
>>Sullivan changed its name to Chopp and in 1990 Herbert Sullivan was still
>>talking about the CHoPP concept, but not about its computer, and Mr Hutton
>>reported a judgement in California, against many of those involved in
>>slagging the company back in 1986, for over US$48-million. Whether the
>>company ever received any money is a mystery, but it is unlikely, because
>>Alex Laurins, the chief defamer and short-seller, had been in jail since
>>1987 on an unrelated matter. There never was a computer that worked. |
