AENY: The Dirty Truth behind the Pretty Coal Stock

by Melissa Davis - 1/19/2010 7:49:31 AM

Click here to start/join a discussion of this article or send tips for future news stories.

Last fall, around the same time that British Columbian regulators issued a cease-trading order for Americas Energy Company (AENY.OB) stock, U.S. investors began fielding bullish emails urging them to buy the company’s shares.

The Intelligent Investor Report, a promotional newsletter published by Jarret Wollstein, highlighted AENY (then trading under the ticker symbol TRET) as his top coal pick of 2009 and predicted that the company would be producing more than $100 million worth of coal annually by the end of next year. He portrayed AENY – a shell company with limited operations -- as a likely “10-bagger” for fast-acting investors willing to buy the shares early and then hold onto them for the long term.

If investors read the report closely, however, they would have learned that it was nothing more than a paid advertisement financed by an obscure firm (calling itself Bistro Ltd.) with 1 million shares of AENY stock that could be “publicly traded (sold) at any time.” They would have also seen that Wollstein himself personally collected $10,000 for writing the bullish report.

Since then, Wollstein has followed up with yet another – even rosier – AENY report financed by the mysterious Bistro. This time, Bistro paid a whopping $700,000 for distribution of the newsletter. In the new report, Wollstein abandoned his previous $11 price target for AENY’s stock and replaced it with a $20 projection that he characterized as conservative in nature.

At one point, in fact, Wollstein claimed that AENY could be sitting on coal resources worth more than an eye-popping $700 a share.

“Even aggressively discounting that by 90%, that still puts $70.37 of coal into every share of AENY,” Wollstein proclaimed. “Even if you have to pay $5 a share for AENY, you’re getting a bargain of a buy with huge remaining profit potential.

“Buy AENY immediately,” he concluded, because “the sooner you load up on AENY, the better.”

Wollstein did not respond to a request seeking an interview for this story.

AENY did clear the $5 mark after Wollstein’s latest report, peaking at $5.59 earlier this month. The stock has since taken a hit, however, and now trades for $4.50 a share.

Still, that price looks incredibly generous to some. Based on the company’s latest regulatory filings, which show 20.5 million shares outstanding, AENY currently sports a market value of $90 million. Yet based on a paid analyst report featured on the company’s own website – which pegs the total share count at both 32 million and 37 million – AENY actually boasts a market value of $140 million or $160 million instead.

Either way, skeptics say, AENY enjoys a remarkably high valuation for a Vancouver shell company with no money in the bank and a dismal track record of success.

Shell Game?

To be fair, investors have assigned that value to another company (also named Americas Energy) that AENY has promised to acquire.

That privately held company, headquartered in Knoxville, portrays itself as an operating coal-mining venture led by a man named Christopher Headrick. Before joining AENY in late 2008, Headrick reportedly ran another Tennessee-based coal-mining operation called PPG, Inc. Those initials stand for Patriot Products Group, government records indicate, a corporation dissolved by Tennessee officials just days before AENY inked its formal merger deal.

Headrick failed to answer a list of emailed questions for this story.

Meanwhile, last week, Dow Jones noted that Headrick’s background appears to be in real estate rather than coal mining. It also identified Headrick’s sidekick, Vice President Jimmy Dunn, as a former mortgage broker who pleaded guilty last year to tax evasion and could face prison time and hefty fines for his crimes.

From the start, AENY investors have nevertheless seemed thrilled by the prospect of purchasing Headrick’s company. AENY (formerly known as Trend Technology) began working on the deal in mid-2009, around the same time that Wollstein first “discovered” the stock, and has already adopted the Americas Energy name as its own. Despite that name change, however, AENY has yet to officially close the deal.

Originally, AENY said that it would complete the merger after raising $1 million to finance the company’s future mining activities. Once AENY raised the necessary capital, however, the company announced a new fundraising target – requiring another $8 million – that must be achieved for the deal to close instead.

Meanwhile, in press releases issued under the shell company’s stock symbol but touting the private company’s operations, AENY keeps mentioning that unfinished merger as a potential risk factor. Critics believe that those news releases have misled investors by tricking them into purchasing stock in a shell company when they think they are buying shares in a legitimate mining operation instead.

Losing Record

Without the merger, AENY itself appears to be worth little. On its own, regulatory filings show, AENY has never achieved any real measure of success.

In its latest quarterly report, AENY lists only three significant “milestones” recorded by the company since its inception. It raised $160,000 in capital, including $60,000 generated through a private placement carried out more than four years ago. It completed two phases of an exploration project that was later abandoned due to lack of successful results. And it finished one phase of another exploration project that has since been deserted for similar reasons.

A major AENY shareholder, Vancouver securities attorney Gerald Tuskey, gave up on the company shortly before it began pursuing its big merger deal. In June, Tuskey sold all 6 million of his AENY shares – a stake representing more than one-fourth of the entire company – for a fraction of a penny apiece. He pocketed just $40,000 for his stock, which would now be worth $27 million at today's lofty prices.

“The securities were acquired for investment purposes,” a regulatory filing explains. And “Mr. Tuskey wishes to employ this capital elsewhere.”

AENY’s current CEO, Leonard MacMillan, had spent more than two years running the company by the time that giant shareholder fled. MacMillan also served as an officer and director at Lexaria (LXRP.OB), a former $6 stock that now fetches just 12 cents a share, until his sudden resignation from the company last year. He has managed corporate communications for Max Resource (MXROF.OB), yet another low-priced penny stock, as well.

Based on his official bio, MacMillan appears to have no formal experience in the energy industry. Although he technically serves as co-CEO of AENY, sharing his duties with Headrick, MacMillan alone still signs off on the company’s official regulatory filings.

TheStreetSweeper could not locate MacMillan to ask him questions for this story.

With MacMillan formally in charge, regulatory filings show, AENY managed to raise $850,000 of the $1 million required to complete its merger (with the funds coming from an unnamed third party) by the end of November. As previously noted, the company has since gone on to raise the entire $1 million but still failed to close the deal.

Flying Jayhawk

Nevertheless, in his bullish reports, Wollstein has treated the promised merger almost like finished business. Meanwhile, he has been busy promoting another speculative energy stock as well.

Jayhawk Energy (JYHW.OB) first became a favorite pick for stock promoters, pocketing six-figure payments for their services, after the company shifted its focus from jewelry to energy back in 2007. Lifted by those touts, JYHW rapidly soared to a record high of $2.75 a share.

The following spring, however, Dow Jones took direct aim at JYHW and those promoting its stock. It questioned the true value of JYHW and noted that one of the promoters touting the shares had previously been sanctioned by securities regulators for issuing misleading information about other companies.

Although JYHW held its ground for a while, it began a steady dive in mid-2008 that finally ended last March with the stock bottoming out at just 15 cents a share. With JYHW hovering around that low, Wollstein suddenly burst forward with a bullish report on the stock. That time, an outfit calling itself Focus Financial Group – and holding 500,000 JYHW shares that could be sold at any time – paid $33,000 to finance the newsletter.

When investors began discussing Wollstein’s recommendation on Internet message boards, JYHW took an interesting step to distance itself from paid stock promoters. In mid-July, JYHW issued a cautious (if vague) warning to investors about relying on third-party analyst reports that may contain inaccurate information about the company. JYHW directed investors to focus instead on its own regulatory filings, which would later reveal that the company had lacked the funds necessary to pursue any new energy projects over the course of the previous fiscal year.

By then, however, Wollstein had already published another bullish report on JYHW and its projected stock performance. In a newsletter fielded by investors around Christmastime – just before JYHW filed an annual report showing that the company had less than $6,000 left in the bank – Wollstein cheerfully predicted that JYHW could soar by as much as 1,200% over the course of the next two years. At current prices, he insisted, JYHW posed “little foreseeable downside risk” and should in fact see “nothing but upside” ahead.

This time, Focus Capital Group paid $100,000 – three times more than it had previously spent – to finance Wollstein’s favorable report. The investment apparently paid off, since JYHW has nearly tripled since that time. The stock currently fetches $1.83 a share, giving the company a market value of $82.6 million despite its limited resources.

Happy Hype

JYHW’s remarkable gains could prove fleeting, however, if the stock follows the same pattern as some other favorite Wollstein picks.

In the fall of 2007, for example, Wollstein identified EnviroResolutions (ENVI.PK) as his favorite green energy stock of the year. Red Tree Ventures – a firm holding 1 million shares of ENVI stock -- paid $87,000 to finance that report, which predicted a swift 345% jump in the company’s share price.

“In a year or two, the companies I find could be worth fortunes and – like ENVI – carve out a solid share of America’s multibillion-dollar green energy market,” Wollstein declared. “Remember, should ENVI take off like I think it will, you heard it first from me!”

ENVI did in fact climb higher after that report, peaking in the spring of 2008 around $3 a share. By then, however, Wollstein was reportedly predicting that ENVI could soar to $38 a share and beyond.

At that point, David Baines – an accomplished penny-stock reporter at The Vancouver Sun -- decided to take a close look at ENVI and Wollstein’s bullish claims about the company. Baines even called the company’s CEO, James Blair, and invited him to dismiss Wollstein’s rosy hype.

“Initially, Blair wondered why he would do that,” Baines reported. “Then, realizing I would be writing about this matter, (he) decided it would be a good idea.”

Two days before Baines published his story, ENVI issued a lukewarm warning to investors about outside reports that had not been sanctioned by the company. The stock, still fetching almost $2 a share at that time, now trades on the lowly Pink Sheets for just 5 cents a share.

Dressed to Kill

Around the same time that Wollstein began promoting ENVI, he apparently started touting Dussualt Apparel (DUSS.OB) as well. In this case, at least, the company immediately tried to distance itself from Wollstein and the claims made in his newsletter. Identifying the Intelligent Investor Report by name, DUSS issued a press release warning about the newsletter and disavowing the “junk email promotion.”

Undeterred, Wollstein followed up with another bullish tout of DUSS less than two months later. In that report, financed with $250,000 from an outfit known as Northern Tiget Investments, Wollstein named DUSS as his top retail pick for the coming year and even suggested that the stock could represent the best investment opportunity of the decade.

“DUSS has ALL of its upside in front of it,” he assured. “Act now before Wall Street’s big money drives DUSS through the roof, or you may regret it for the rest of your life.”

DUSS shares, which commanded around $1 at the time, now sell for less than 3 cents apiece.

For now, at least, investors still have high hopes for Wollstein’s latest stock picks. AENY continues to boast a generous share price, hovering comfortably above $4, despite mounting concerns about the company. And if management gets its way, that stock will remain a winner.

In fact, when the stock started to fall from its record high earlier this month, one of AENY’s CEOs reportedly warned Internet chat-room critics against taking actions that could hurt the company or its share price.

“We are NOT a pump-and-dump company,” vowed an online message attributed to Headrick. So “if you are here only to disparage our company and cause us financial harm, be prepared for the consequences.”

The message adopted a lighter tone after that threat, ending with a strong hint that good news would soon be on its way. Specifically, it promised an update on the British Columbian cease-trading order – sparking rumors that it could soon end – by the following afternoon.

That update never came. AENY has yet to see the order lifted almost two weeks later, just as the company has yet to close the celebrated merger – despite its fundraising activities – that has provided so much fuel for its runaway share price.

* Editor's Note: TheStreetSweeper hired an independent fact checker to verify the accuracy of this story. Whenever possible, it has also included links to the actual documents used during the course of its research. To contact Melissa Davis, the author of this story, please send an email to editor@thestreetsweeper.org.

Share

For Previous Stories Click Here!