Yet another article in suport of Ray Dirks fraudulent pump-and dump.
PRESSFriday October 26, 2:08 pm Eastern Time
SmartMoney.com - On the Street
Watch Out for the Anthrax Gang
By Matthew Goldstein
THE LEGENDARY Friars Club in New York is known around the world as a place where comics and entertainers have gathered for decades to roast each other. Just last month, some funny people got together to skewer Playboy (NYSE:PLA - news) founder Hugh Hefner. But it isn't the place you'd expect a corporate chief executive to pick as the forum for announcing something as deadly serious as a new home-testing device for the anthrax bacteria.
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But the Friars Club was where Donald Podrebarac, president and CEO of Vital Living Products (OTC:VLPI - news), found himself on Oct. 23, trying to convince a somewhat skeptical press corps that his company's do-it-yourself anthrax-detection kit will actually work. The verdict is still out on that, since the product is being readied for shipment and won't go on sale until sometime in late November. The suggested retail price is between $19 and $25.
One thing's for sure, though: The unusual press conference and two widely circulated news releases trumpeting the event are doing wonders for Vital Living's stock. On Thursday, Vital Living, which trades on the OTC Bulletin Board and had been as low as a nickel a share on Oct. 1, closed at 75 cents. That's actually down considerably from Oct. 18 — three days after it first announced the product and press conference — when the stock soared 294% to $1.97 a share and a whopping nine million shares changed hands. In the days before anthrax and Osama bin Laden became headline news, a meager 5,000 shares of Vital Living traded on a typical day. Reflecting on his company's moment in the spotlight, Podrebarac says: ``The ultimate issue here is, 'Will the company and product we're developing stand the test of time?'''
The eruption of bioterror is spawning a brand-new cottage industry for small, nondescript companies — many with spotty operating histories — that are trying to cash in on the public's fear. In the weeks since the Sept. 11 terror attacks and the first anthrax-laced letters started appearing in the mail, a growing list of public companies — most of which trade as penny stocks on the Bulletin Board — have been jockeying to announce the latest product that purportedly detects or kills anthrax and other hazardous materials. And in a stock market where most investors are still feeling their lumps from the brutal bear market, more than a few people are willing to risk a few bucks on what they're hoping will prove to be the Next Big Thing — the Microsoft (NASDAQ:MSFT - news) not of the New Economy, but of the Terror Economy.
But securities regulators say investors need to take a long, hard look before pouring money into any of these highly speculative stocks — especially when those stocks trade on the Bulletin Board. While regulators have moved in recent years to clean up the Bulletin Board by requiring all listed companies to file regular financial statements, no Wall Street analysts follow Bulletin Board stocks and few institutional investors will go near them. That means individual investors are pretty much on their own.
And just because Bulletin Board companies now have to file periodic financial statements doesn't mean you won't be alarmed by what's in them. Investors might have been intrigued by a press release issued on Oct. 25 by Veridien, (OTC:VRDE - news) a Pinellas Park, Fla.-based company. The release announced that a pathologist who sits on the company's scientific-advisory board ``has concluded that some of its Viraguard disinfectant product is effective in killing anthrax bacteria and the smallpox virus.'' Unfortunately, the most recent financial filing for Veridien reports that the company has incurred $32 million in losses since its inception, and its accountants have expressed doubts about its ``ability to continue as a going concern.'' Additionally, the company has been in technical default on loan agreements since 1996, but claims that the lender has been giving it time to work off the debt. A company spokesman acknowledges that it can be risky to invest in a company with a history of losses, but says ``there is a risk in any company.''
Some of the anthrax-related claims surrounding these little-known companies are just plain baffling. International Cavitation Technologies (OTC:ICTKE - news), a small Tulsa, Okla.-based company, purportedly issued a press release on Oct. 25 touting the anthrax-destroying capability of its Airborne Removal System. The release, which went out over Business Wire, one of the two main news services that distribute corporate press releases, was withdrawn a few hours later at the company's request. Since the release was issued, the stock has traded about 7% higher to around 14 cents a share. An International Cavitation officer, who didn't want to be identified, says the company didn't intend for the release to go out but wouldn't say whether or not it was a hoax. Phyllis Dantuono, a Business Wire senior vice president, would only say the news service was ``given authorization by the company to kill the release.'' Hoax or simple mistake, the incident is a good reminder to investors about the dangers of making snap judgments based solely on a corporate release.
Securities regulators say the best thing investors can do with most penny stocks is to simply stay away from them unless they really know a lot about the company and its operating history. Regulators say that's particularly important at a time like this, when many investors are getting inundated with spam emails from investor-relations firms and stock promoters touting little-known companies with supposed solutions for terrorism. ``The thing with anthrax is that not even the experts can agree on what's going on, so for a lay person to understand one of these things is just a monumental task,'' says Marc Beauchamp, executive director for the North American Securities Administrators Association, an organization that represents top state securities regulators. ``The average investor ought not to try to jump on a fast-moving stock in the wake of some calamity. You're just going to get whipsawed.''
And it's important to note that Bulletin Board stocks aren't the only ones that can whipsaw investors. Last week, we cast a skeptical eye on Nasdaq-listed eSafetyWorld (NASDAQ:SFTYE - news) in our new daily feature One-Day Wonder. The Bohemia, N.Y., company's shares soared more than 400% on Oct. 19 on news that it had a new product designed to make it safer to open suspicious mail. The big news jolted the stock, which had been trading around 55 cents the week before, to a 52-week high of $3.46.
But Monday, Nasdaq Stock Market officials halted trading in eSafetyWorld pending the company's submission of ``additional information.'' In a news release, the company said it expected the stock to resume trading once it gave a demonstration of the product to Nasdaq officials. That demonstration was supposed to have occurred on Wednesday. An investor-relations representative for eSaftetyWorld says he believes company officials performed the requested product demonstration, but are responding to further questions from Nasdaq executives. He couldn't say when the stock would resume trading again. Nasdaq officials wouldn't specifically comment on the trading halt, but one did point out that stocks that are halted sometimes don't start trading again for weeks or months.
Of course, eSafetyWorld, or any other of these small, highly speculative companies, could turn out to have the Next Big Thing. But there's almost no way of knowing, and that means investing in them is about as close to gambling as you can get. |
