Heart attack time Frenchy: "SEC Scrutinizes Web Firm For Touting Plans for IPO By AARON ELSTEIN THE WALL STREET JOURNAL INTERACTIVE EDITION
Regulators are investigating an Internet company for allegedly trying to
drive up its stock price by publicizing a bogus initial public offering.
Wellness Universe, a onetime maker of wine
and spirits, stirred considerable interest in
online stock message boards after the
company publicized its plans to recast itself
as an e-commerce site targeting evangelical Christians, which it called "the
world's spiritually starving population."
In its releases, Wellness Universe said it would generate $5.4 billion in
profits and file for an initial public offering that would be worth $1 billion.
Investors snapped up the stock, driving it to a high of 1 1/8 from 1/8 in just
four days in late December.
The releases and the stock surge caught the attention of the U.S. Securities
and Exchange Commission. On Friday, the SEC suspended trading in the
company's stock, saying it acted because of "questions about the accuracy
and adequacy" of Wellness Universe's publicly disseminated information,
including its "purportedly planned" IPO.
John Reed Stark, director of Internet
enforcement at the SEC, said the commission
would over the next two weeks review trading
activity in shares of Wellness Universe.
Wellness Universe's stock jumped after the
company announced Dec. 27 that it "intends" to file documents with the
SEC for a proposed IPO in the first quarter of 2000 valued at
approximately $1 billion. Chatter about the IPO in Internet stock message
boards helped fuel the stock's rise.
The stock soared again late last month after George Charles Pappas,
chairman of the company, offered in a press release to buy all Wellness
Universe's outstanding stock outright for $6 per share -- at the time, the
shares were trading at about 33 cents apiece.
Mr. Pappas said payment for Wellness Universe shares would be made in
"public stock" of Synpan Group, a company that he said would act as a
holding company for Wellness Universe and other e-commerce businesses.
Mr. Pappas, who is 100% owner of Synpan, didn't mention at the time
that there is no public market for Synpan stock. In a Jan. 21
announcement, he called the deal "an excellent offer for the WELU
shareholders to capitalize on the Synpan IPO."
Mr. Pappas didn't return phone calls.
The news of a proposed buyout and IPO generated considerable
excitement among investors who saw a chance for easy profits.
"WELU is being bought out soon. $6 a share for those who are smart
enough to get in now," wrote a person Jan. 24 on a message board on
personal-finance site Quicken.com. More than 9,000 messages have been
posted about the company on the stock-chat site Raging Bull.
Mr. Pappas is a former chief executive of
Worldwide Leisure, a Minneapolis company
whose holdings include Thessaliki Spirit, a
manufacturer of wine, spirits, and commercial
and pharmaceutical alcohols based in Athens,
Greece. According to a press release, in 1997
Mr. Pappas owned 37 million shares of
Worldwide Leisure, whose name he changed
to Wellness Universe in April 1999.
In 1998, Mr. Pappas wrote a book called,
"Synpan -- Inside the Wellness Universe," a
religious tract which "takes the individual from an awakening to a
transcending state and synergizes the optimum life for all," according to a
review attributed to Mr. Pappas on online retailer Amazon.com's Web
site. The review added: "Spirituality and capitalism are not mutually
exclusive."
On Dec. 22, Wellness Universe said it is building a Web site called
Synpan.com that would offer products, services, advice, and "rebates with
fulfillment" to evangelical Christians. The company plans to recruit six
million customers through evangelical organizations. These customers, in
exchange for a free wireless phone and Internet access, would commit to
spending $15,000 annually on the company's e-commerce site using a
credit card called SynpanCard, which the company says it's developing.
By collecting 6% of the anticipated gross purchases, Wellness Universe
says it can turn a profit of $5.4 billion.
So far, Wellness Universe has announced an agreement with only one
evangelical organization, Community of Joy, an 11,000 member group
based in Glendale, Ariz. Community of Joy officials did not return calls.
Mr. Pappas's attorney, Lee Steiner, said Wellness Universe sent a letter
last July to Citigroup Chairman Sanford I. Weill about marketing
SynpanCard, saying that "Citigroup is a perfect match to get into bed with
Synpan." But he said Citigroup hasn't responded. Citigroup declined to
comment.
The SEC's Mr. Stark said investors should never buy a stock based on
what is said in online message boards. "The reason we say that is you can
never be sure of the credibility or integrity of the person posting information
on the Internet," he said.
In addition to making extraordinary projections about its business plans
and profitability, last month Wellness Universe announced that it had
agreed to buy Internet search engine Spiderboy.com, a privately held
company in Fort Myers, Fla., that owns the domain names to over 150
Web sites, including AOLdirectory.com and Internetsingles.com.
Spiderboy.com's chairman, Norman Pardo, said Mr. Pappas called him
Christmas Day and proposed to buy Spiderboy.com in exchange for
Wellness Universe stock, and later faxed his offer. But Mr. Pardo said he
told Mr. Pappas he was interested only in a cash offer for the company.
Mr. Pardo said he never heard back from Mr. Pappas until he learned the
afternoon of Jan. 3 that Wellness Universe had announced that day that it
had agreed to buy Spiderboy.com. The release quoted Mr. Pardo as
saying Mr. Pappas was "determined, astute, and financially oriented."
"I've been answering a lot of calls ever since to tell people that, 'No, I
haven't sold,'" Mr. Pardo said. "I never signed anything. I didn't authorize
anything. This is a real headache." He said the SEC has contacted him
regarding Mr. Pappas.
The SEC declined to comment." |
