Richard Geist's Strategic Investing re-iterates strong buy on Solv-Ex in wake of Dorfman's attempt to destroy company credibility.
In one of the more malicious and irresponsible cases of financial journalism witnessed in many years, Dan Dorfman used his CNBC bully pulpit in an extraordinary attempt to destroy Solv-Ex and its management's credibility. Citing an unnamed 'Wall Street Pro' he proclaimed that the SEC was investigating trading in SOLV's stock. He also said that Fahnestock & Co. analyst Fadel Gheit believed the company is a 'typical hype, pie-in-the-sky' story and that SOLV's stock is worth less than $5.
Dorfman was not without the facts on SOLV. He had in his possession copies of Strategic Investing's November 1995 recommendation on the Company and energy analyst Charlie Maxwell's letter to his clients stating that if all went well with Solv-Ex, the company could become the world's leading oil producing company by the year 2008.
Dorfman could also have had access to David Snow's detailed analysis of SOLV in which Solv-Ex's stock could be at $200 within two years and at $1000 within a decade. If Dorfman had bothered to inquire, he could have studied an independent technology consultant's report (Pace Consultants, Inc. Houston, Texas) on the positive viability of both SOLV's technology and their marketing plan. He could have discussed his concerns with the Company rather than telephoning them at lunch time shortly before the show when no one was available and then never following up. He also could have revealed that the so called expert analyst -- Fadel Gheit -- worked for a firm that allegedly has been shorting the stock and that the analyst had had no contact with the Company for two years, and to our knowledge has not issued a report on the Company.
None of the facts or projections we have made in our November or December issues has changed. The SEC has not contacted Solv-Ex, and any investigation of share manipulation would probably focus on the short sellers. Permits for a co-production plant to produce oil, and later, alumina from oil sands on the Company's Bitumount Lease in Alberta's Athabasca region were received on Dec. 12, 1995. A week later the Company received formal approval to proceed with construction and operation of a plant to process oil sands tailings for production of minerals and metals. Financing is imminent and will include a combination of 50% debt and 50% equity. The Company has access to 4 billion barrels of oil and is sitting on 10% of the world's alumina supply -- hardly a $5 per share company. Plant construction will be under way soon, and the potential for the alumina cell to revolutionize how and at what costs this mineral is produced remains extremely positive. A secondary offering with a major investment banking firm is likely in the near future. If Dorfman wanted to rationally question the rise in SOLV's stock price, which was probably motivated by anticipation of financing rather than a short squeeze, he could have legitimately questioned whether the technology would work in real life, and then checked to see that there had been outside verification of the technology as performed in the Company's pilot plant. It is certainly legitimate to debate the technology, but not if one failed to take the time to learn about it.
For whatever reason, Dorfman decided to side with the short sellers. Although we know that rumor and innuendo is Dorfman's trademark, the idea that his glib speculation and negative hype probably caused small investors to experience margin calls and potentially large losses of capital reminds us of some one who would yell fire in a crowded theater and then take pleasure when folks get trampled as they headed for the exits. The more important question in this scenario, however, is not Dorfman's motives or character or CNBC's rationale for supporting this three ring circus (all of which many have questioned). It is, rather, why do investors take seriously such bombastic and unsubstantiated rhetoric?
Solv-Ex has a lab-proven and independently verified technology, extremely honest and forthright management, and a workable business plan. The stock was pushed back to the mid $20 range -- our initial short term target for the stock -- from the mid $30 range. It is a strong buy at these levels, and once the financing is in place we look for the stock to begin moving toward the $50 range. Solv-Ex is a strong buy for aggressive investors. |
