The business of turning paper into gold without producing anything has become a fine art on Howe Street.
The latest to achieve this miraculous feat is Trend Technology Corp., a made-in-Vancouver bulletin board shell company that has morphed into a horrendous stock promotion under the newer and grander name of Americas Energy Company.
Bolstered by the hysterical exhortations of a vacuous but well-compensated U.S. newsletter writer who comically bills himself as "one of the most highly regarded market analysts in the world today," the stock has rocketed from pennies to $4.19 US.
The company now has a total stock market value of more than $220 million. This is quite a feat, given that the company's assets consist of a few coal concessions that have so far produced nothing but losses.
Trend Technology is a Nevada-incorporated company that, until a few days ago, was run from the Hornby Street office of Gerald Tuskey, a longtime Vancouver securities lawyer who has helped organize and finance dozens of junior ventures.
The company's stated business plan was to explore a mineral prospect near Houston, B.C., but by March 2008 -- after spending less than $50,000 on exploration -- it allowed its claims to lapse. But no worry, it had a more valuable asset: A publicly traded, tightly-held shell that was perfect for some other promotion.
Sure enough, in July 2009, the company announced it would acquire a newly incorporated company, Americas Energy Company.
Americas Energy had assembled a collection of coal concessions in Kentucky and Tennessee. The proposed purchase price was some cash plus 17 million shares. When the shares were issued, control would pass to the principals of Americas Energy, led by Chris Headrick of Knoxville, Tenn.
Americas' coal concessions have a book value of just $1.7 million US, and they do not appear to be very lucrative at this stage. From the company's incorporation in July, to the end of November, total revenues were just $530,017 and the net loss was $356,689.
Management doesn't appear very strong either. Headrick has little or no experience in mining. Neither does vice-president, Jimmy Dunn Jr. More disturbingly, Dunn pleaded guilty to federal tax evasion last year and is now awaiting sentencing.
None of this appears to concern U.S. newsletter writer Jarret Wollstein, editor of the so-called Intelligent Investor Report.
"Americas Energy Company (AENY) is amassing claims in Appalachian coal that could soon make it one of the top coal companies in the nation," he trumpeted in his newsletter. "I'm not kidding. This is huge. ... AENY is a $20 a share in the making that you can buy at a bargain basement price of $1.50. ... The sooner you load up on AENY the better."
Wollstein has made similar exhortations in the past. In early 2008, he predicted Vancouver-based EnviroResolutions Inc. would run to $38 or $40. However, the stock ran out of steam at $3 and has since fizzled to four cents.
The disclaimers at the bottom of his reports show they are nothing but advertisements, paid by shareholders who wanted "to create investor awareness" of the companies.
In the case of Americas Energy, the financier was said to be Bistro Ltd., a private company that held one million freely tradable shares. Bistro paid Wollstein $10,000 for his report, plus $150,000 for its production and distribution. The person or persons behind Bistro have never been revealed.
Headrick, as usually happens in these cases, has disavowed any knowledge or participation in Wollstein's hype, but has not issued a release repudiating it.
In October, B.C. Securities Commission officials -- no doubt alarmed by what was happening -- issued a cease trade order against Trend. The stated reason was that the company's auditor, Peterson Sullivan LLP of Seattle, is not registered with the Canadian Public Accountability Board. The order, which is still in effect, prevents B.C. brokers from trading the stock and B.C. residents from selling it, but has no application in other jurisdictions.
However ridiculous Wollstein's hype may seem, it seems to work. The stock climbed as high as $5.59 US earlier this month.
The merger was not completed until a few days ago. Rather than paying 17 million shares, as originally announced, the company ended up issuing 33 million shares, which raised the number of shares outstanding to 53.5 million. Despite this unexpected dilution, the shares were still trading at $4.19 each on Friday, for a total stock market value of about $220 million.
All things considered, it doesn't take a genius to predict that this stock will end up in the basement, right beside EnviroResolutions.
dbaines@vancouversun.com
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