Here is more info. This should start another round of name-calling, rudeness!!
Crystallex International Corporation KRY
Shares issued 34,000,000 Mar 6 close $7.25
Fri 6 Mar 98 Street Wire
Also Placer Dome Inc (PDG)
THE LONG AND SHORT OF MANUEL ASENSIO
by Stockwatch Business Reporter
Just as a CEO knows it probably will not be a good day if he or she arrives
at work to find a crew from 60 Minutes waiting in the lobby, management of
listed companies likewise know it will not be a good day if they are the
subject of a research report from blustery short seller Manuel P. Asensio,
chairman of his own New York investment concern Asensio and Co.
Such was the fate of Vancouver-based Crystallex International, which found
itself on the wrong end of an Asensio short-sell recommendation when he
issued a series of six reports on March 3 and 5 calling into question
whether Crystallex has a legitimate claim to the rich Las Cristinas 4 and 6
concessions in Venezuela. Crystallex and Placer Dome have been involved in
a title dispute over the property, but Mr Asensio says nothing of the kind
is taking place. Rather, the Venezuelan Supreme Court is dealing with some
"circular" arguments and legal technicalities and that it is not addressing
the question of ownership.
Asensio and Co's reports prompted a sharp drop in Crystallex stock. KRY
closed on March 5 at $6.90, down $2.35 on the day, although the next day
the stock rallied $0.35 to $7.25. As recently as March 2, the stock traded
as high as $11.85 intraday on widely reported rumours that Crystallex stood
a good chance of emerging from the court as the sole owner of the
concessions. In a report carried in the Financial Post of February 19,
Whalen Beliveau analyst Dorothy Atkinson said sentiment had shifted in
favour of Crystallex on the ownership question. She added that if the
courts back KRY, its shares could climb to the $25 range.
"First of all, the supreme court cannot give them title to Las Cristinas,"
Mr Asensio happily volunteered from New York. "So if they get the right to
sue and they sue and win, the judge they win from cannot give them the
right to Las Cristinas. They still have to go back to minister and the
minister said 'You're not getting it -- you never had it.'"
Las Cristinas reportedly contains around 12 million ounces of gold. Placer
Dome wants to develop the deposit jointly with a Venezuelan government
agency at a cost of about US$600 million.
Crystallex hotly defends its activities in Venezuela as good and ethical,
and that it has a reasonable chance of emerging from the court case with
title to Las Cristinas. Crystallex on March 4 announced the commencement of
legal proceedings against Asenio and Co for disseminating "false and
misleading statements" about Crystallex and its officers, and for
manipulating its share price. In the statement, chairman Robert Fung called
Mr Asensio a "notorious short seller" who has a direct financial interest
in driving down the price of KRY and other stocks they target. It does not
seem to be a description that Mr Asension denies.
Mr Asensio, who believes Crystallex will be a $0.50 stock on the TSE and
AMEX within a couple of months, is unmoved by the company's protestations.
"All it is is a classic pump and dump," he says. "It could be in a text
book under pump and dump -- just look under Crystallex. You couldn't get it
any clearer." He adds his company has to date never had to defend itself in
a court of law over its short-selling activities or its reports, although
threats such as the Crystallex statements are common for his company.
Mr Asensio, backed up by extensive postings on his Internet webesite
(http://www.asensio.com) says his company made early and correct short
calls on recent US share-price manipulation scandals invoving Solv-Ex Corp
and Diana Corp -- as well as a notable long call on Coke in late 1993. He
says he picked high-flying NYSE-listed meat-delivery-firm-turned
high-tech-communications company Diana as a short at US$100 and rode it all
the way down to $2 between May 1996 and early 1997. A Silicon Investor
posting dated August 1, 1997 reported the Diana call grossed "over US$30
million" for Mr Asensio's clients, but there is no evidence to back the
boast.
The titles of the various Diana reports that can be found on the Asensio
and Co website include such attention-getters as "Diana issues yet another
false statement." Mr Asensio calls US-based Alberta tar-sands developer
Solv-Ex a "17-year fraud"; last year, Solv-Ex declared Chapter 11
bankruptcy, but not before it further enriched Mr Asensio's clients.
The broker-researcher claims the Crystallex lawsuit does not concern him.
"Not at all," he says. "It doesn't bother us at all, especially if it's
(New York lawyers) Cleary Gottlieb." Mr Asensio says the law firm, Cleary
Gottlieb Steen Hamilton, has taken a run at Asensio and Co before, and
failed. That took place last year over what Asensio and Co had to say about
Solv-Ex. Solv-Ex began legal proceedings against Asensio and Co last year
but the case was dismissed before it came to trial.
"They have a fellow there named Ed Mishkin who is attempting to create a
little industry at his firm harassing Asensio and Co," he states. "But he
is not a very good attorney, not a very good litigator, and the truth is
with us. We have nothing to fear. On top of that, in the United States we
have freedom of speech, thank God, which you guys don't have up there (in
Canada)."
As for the claim his company and his clients have a pecuniary interest in
seeing his targets fall, Mr Asensio agrees, offering an aggressive
interpretation of the often symbiotic relationship between those who pump
stocks up and those who drive them down. "Correct. That's the American way.
He's the crook and I'm the cop. I profit by being a cop and that's been
good to me. I don't want to be a crook."
Mr Asensio, 43, first came across Crystallex by way of a television
advertisement on CNBC while he was on vacation in Miami in October. He says
he was first interested in the stock as a risk-arbitrage possibility,
meaning that if Crystallex stood a good chance of winning the court case,
there may be handsome gains to be made. Mr Asensio first became suspicious
when he discovered the man touting the stock on TV billed himself as a
hot-shot money manager, when in fact the assets under his management
totalled only around US$2 million.
Then he contacted an attorney with experience in Venezuela to determine the
exact nature of the case before the supreme court, and that's when he began
to view Crystallex as a short-seller's dream come true. "Of course, you now
know what I discovered," says Mr Asensio, who adds that part of the problem
has been Placer Dome's less-than-aggressive stance on the issue, which has
helped give the impression that KRY had a legitimate challenge to Las
Cristinas.
Like many short sellers, among Mr Asensio's talents is an ability to
attract media attention, having been quoted regularly and routinely in
major US financial outlets. Mr Asensio attributes his popularlity with the
press to his belief that he is one of the few securities players who is
willing to blow whistles loudly on wrongdoers. "Most researchers don't have
convictions, so their materials are not the source of contention," he
posits. "We only do things where we have conviction. If you're not willing
to come out and call a spade a spade, you shouldn't be in this business."
All that spade-calling appears to have been good for business. Mr Asensio
claims to have returned triple-digit results for his clients over the past
three years.
Mr Asensio has his share of supporters and detractors. Whalen Beliveau
analyst Atkinson, in the March 5 Sun story, was reported skeptical of the
Asensio and Co report on Crystallex. "If it's a one-man shop trying to
cover short positions, it certain had the desired effect," she said.
Mr Asensio will not disclose the size of his short position against
Crystallex and is vague on the size of his operation. He boasts that he has
the biggest short-selling research staff on Wall Street but that they must
work surreptitiously so they can gain access to the information they need
to assess a company. "Our research employees are all employed under
separate companies and do undercover work," he explains. "We have the
largest research staff and certainly the best paid and most professional
research staffs on Wall Street -- and the largest research commitment to
short selling, which is more than US$1 million a year."
In addition to the unlikely sounding cloak and daggar stuff, Asensio & Co
is not a member of any US stock exchanges.
One member of the relatively small short-selling fraternity told Stockwatch
she thinks Mr Asensio's research is excellent, but that she has deep
reservations about his high profile in the media. "I think he's out of his
f------ mind," she says. "I'm not saying the guy isn't smart. I just try to
be more discrete about my shorting. Everybody who is out in front of shorts
eventually gets taken out and shot. I happen to be fond of my own head."
The broker, who declined to be named for this story, says that while Mr
Asensio is a little too flamboyant for her tastes, "he does good
fundamental work and I can't fault him for that at all." She added that the
idea Mr Asensio is a one-man operation is wrong, but would not comment on
how big an operation she thought was Asensio and Co.
Mr Asensio rejects the assertion that he is high profile or flamboyant. "We
don't have a PR agent, we don't advertise, we don't seek it," he says. "I'm
not high profile. I'm as low profile as you can find. Here I am on the
phone with you. You call me, I'll answer the phone. I don't ride around in
a limousine."
Like the other short seller, many major US business publications take Mr
Asensio and his work seriously. In the current issue of Fortune magazine,
dated March 16, Mr Asensio is quoted in connection with a story about a
number of companies involved in promoting drugs that supposedly cure or
reverse the effects of impotence. In the story, "The Selling of Impotence",
Mr Asensio was cited as having issued a report on November 18 as saying
Vasomax, a drug promoted by Texas start-up company Zonagen, "has no
commercial value." The news brought out other short sellers and shares of
US-listed Zonagan plunged from around US$47 to US$20 by year-end.
Quotes from Mr Asensio also can be found in the Internet's Microsoft
Investor (investor.msn.com). A feature on short selling, "Shorts Pant But
Aren't Dead Yet", dated February 17, 1997, referred to Mr Asensio as a
"leading" short seller.
While Mr Asensio has made a career of going after companies he believes are
less than squeaky clean, he has had his own problems with the powers that
keep an eye on brokers. The Washington, DC-based National Assocation of
Securities Dealers (NASD) -- a self-regulating body to which all brokers in
the US must belong -- replied to a request about Mr Asensio's status as a
broker on March 6 with more information than whether or not he was a NASD
member in good standing.
In its reply, the NASD reported that on May 23, 1994, Manuel Peter Asensio
was "censured and fined $7,500 jointly and severally for violations of
Article III, Section 1 of the Rules of Fair Practice and Schedule C, Part
I, Section 1 (e) of the NASD by-laws. Without admitting or denying the
complaint allegations, Asensio consented to the following findings: A
certain member firm, acting through Asensio, failed to compaly with its
restriction agreement with the NASD. (NASD complaint No C10940010.)
Mr Asensio says the censure and fine stemmed from a technicality and
"stupid" oversight on his part relating to the modest capitalization his
young firm possessed at the time. He says without knowing it, Asensio and
Co was trading in excess of what its licence -- called a restriction
agreement -- permitted regarding proprietary, or in-house, trading. "We
have never had any problems with regards to any compliance issues
concerning sales, trading or research," Mr Asensio argues. "The problem was
our restriction agreement between the NASD and Asensio and Co. As the firm
gets more capital, it is allowed to trade more and is allowed to conduct
more business. Our problem was that we traded excessively in our
proprietary trading account and we were not allowed to do that. It was a
stupid thing. We never even knew that we were a proprietary trader."
Crystallex has been reviewed by California-based stock analyst and
newsletter writer Robert Bishop, who named the stock a "best buy" in the
exploration category of the January 22 issue of Gold Mining Stock Report,
at a little under $6 a share. In the review -- one of at least three Mr
Bishop has penned on KRY -- Mr Bishop wrote that Placer Dome's suspension
of mine construction activity earlier in January was a "tacit admission
that Placer can see the handwriting on the wall, and that the company knows
it is going to lose its battle for Las Cristinas 4 and 6." This move, he
added, "is vastly preferable to them simply sitting back and waiting for a
ruling against the company."
In the report, Mr Bishop also asserted his belief that a major mining
company was positioning itself to do a deal with a victorious Crystallex.
Calls to Crystallex's Vancouver office and to Mr Bishop went unanswered as
of press time. |
