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SEC Sulphco Inquiry - read the Dow Jones Newswire colum below............
DJN = DJ IN THE MONEY; SEC Inquires About Sulphco Activities
Symbol: SLPH
Industry: EQS OIE SCR
Government: SEC USG
Subject: DJN DJWI CNW DJPF DJS DJWB IMN POV RGU
Market Sector: ENE FIN NND
Geographic Region: NME NV US USW
Product/Service: DGA DIS DWV
A Dow Jones Newswires Column
By Carol S. Remond
New York (Dow Jones) -- The Securities and Exchange Commission has begun inquiring about Sulphco Inc. (SLPH), a small Nevada startup company that claims it can remove sulfur from gasoline.
It's not know if there is a formal inquiry or what exactly regulators are probing. However, two people close to the company told Dow Jones Newswires they were interviewed last week by an agent from the SEC's Salt Lake City office.
These people close to the company said the SEC seemed interested in some recent Sulphco stock transactions and the growing short position in the company's stock.
A spokesman for the SEC in Washington declined to comment.
Stan McLelland, Sulphco's new chief executive, said the company has not been contacted by the SEC.
The company has attracted the interest of short sellers and has begun to fight back. Sulphco said in late June that it filed a lawsuit in U.S. District Court of Nevada against one short seller, Anthony Elgindy, claiming he had manipulated the company's stock in concert with other short sellers. Elgindy denies the charge. Also, a person familiar with the company said Sulphco complained to the NASD earlier this year about short sellers driving its stock price lower.
It's not known what the short position actually is in Sulphco because the Nasdaq doesn't keep those statistics for companies that trade on the Over-The-Counter Bulletin Board.
Sulphco's stock has traded between $11.95 and 25 cents over the past year. It currently trades around $1.50.
Meanwhile, Sulphco discolsed in its most recent quartly report filed with the SEC earlier this month that the number of shares outstanding has increased by 11,885,750, or almost 50%, since its last filing. The company now has 34.6 million shares outstanding.
Almost 10 million of that increase is from the exercise of options, mostly by Sulphco employees. However, no money changed hands. Instead, Sulphco essentially wrote an I.O.U. it calls a common stock subscription receivable with the idea the employees must pay the company a total $ 5.4 million in two years for the stock they were just given.
Sulphco also issued stock to consultants and outside investors. According to the SEC filing, the company said it issued 100,000 restricted shares to a fund registered in Reno called Coldwater Capital LLC and 200,000 restricted shares to a broker-dealer Sterne Agee & Leach Inc. It didn't say why the shares were issued.
A Sterne Agee official said the firm did receive the stock but with instructions to put it in an account for Coldwater Capital. Those instructions came from Sulphco's stock transfer agent, The Nevada Agency and Trust Co.
Mark Neuhaus, identified in SEC filings as the sole member of Coldwater Capital, couln't say for sure whether his fund still holds Sulphco stock.
Neuhaus, a race car driver with a bent for investing in tiny startups traded on the OCTBB, has in the past received stock from companies in connection with them sponsoring his racing. For example, companies will often compensate a driver or his team if the driver or the car wears or carries a sponsor's logo.
No one at Sulphco was available to explain why Neuhaus got the stock. (All of the other stock issuances in the second quarter are explained in Sulphco's latest quarterly report filed with the SEC).
As is the case with many startups looking to preserve cash, a big chunk of Sulphco's shares were issued to insiders and investors instead of being offered to the public in a registered offering. These shares are often given or sold at a discount to market prices to reward insiders and investors showing an interest in a company early on. Commonly known as restricted stock these shares can't be traded for a certain amount of time, usually a year or two.
The restricted shares that Sulphco says were issued to Coldwater were instead freely tradable and were ultimately registered with the Depositary Trust Corp., a central clearing house that tracks stock ownership electronically.
Alexander J. Walker Jr., a former SEC attorney who is a Sulphco director and its corporate secretary, said the stock issued to Coldwater was restricted. He added that he didn't know how the shares became freely tradable. Walker is in the position to know which shares are restricted and which ones aren't - he runs Nevada Agency and Trust, the stock transfer agent for Sulphco.
The transfer agent is the entity which, under a company's instruction, prints stock certificates. Those certificates come with or without a restrictive legend depending on whether they represent free to trade or restricted Shares.
Sulphco CEO McLelland was also unable to explain how Coldwater got unrestricted stock. "That stock should have been legended as restricted," McLelland said.
Another mystery involves 100,000 shares Sulphco says it issued to Paul Nielson.
Nielson is an engineer working for Bechtel Corp., a company which earlier this year considered doing business with Sulphco. He says he never received the stock.
A spokesman for Bechtel also said that Nielson never received shares from Sulphco. "This is a complete fabrication," the spokesman said. The engineering company has now referred the matter to its lawyers, the spokesman said, adding that it would have been against Bechtel's practice for one of its employees to accept stock in a comapny with which Bechtel was considering a business alliance.
Sulphco's McLelland said he couldn't explain the descrepancy. He acknowledged that the company's record keeping with respect to its shares was "very very sloppy' and added that the company's stock transfer agent was 'not wonderful.'
Finally, there appears to be some controversy about another recent investment in Sulphco.
Mexican Glass maker Vitro S.A. de C.V., which was listed in the SEC filing as owning 350,000 Sulphco shares in exchange for $1 million, says it's trying to get its money back.
A Vitro spokesman declines to say why Vitro changed its mind.
McLelland wasn't available to discuss Vitro's change of heart.
Carol S. Remond; 201-938-2074; Dow Jones Newswires
carol.remond@dowjones.com
(END) DOW JONES NEWS 08-30-01
04:00 PM |
