North American investors are going wild over a little-known Ontario company that claims to have a vaccine to stop AIDS and prevent the onset of AIDS in HIV-positive patients. The company, HIV-VAC Inc., which has no office or telephone number, claims to be in the "process of developing one of the most significant medical discoveries in the 20th century."
The boast has sparked fevered buying of the firm's shares on the NASDAQ stock exchange in New York. Since June, almost 60 million shares have changed hands. The price has soared from 23 cents to 93, and then yo-yoed back to 32.
Sexy world But is the market frenzy really toasting a new scientific breakthrough -- or is this just cyber-generated fluff? Stock hype now flies so thick and fast that the main U.S. stock market regulator, the Securities and Exchange Commission, has 250 lawyers, accountants and investigators targeting Net stock fraud.
But in HIV-VAC's case, there's a real doctor involved. Gordon Skinner -- formerly on the medical faculty at the University of Birmingham -- has published numerous scientific papers on the development of a vaccine to treat genital herpes and has three U.S. patents for that vaccine. Skinner is using the same technology to try to produce a vaccine targeting HIV, but so far has no patent registered.
Company co-founder Kevin Murray says animal testing with the vaccine is being done in Russia, where human clinical trials are scheduled to begin within a year.
Desperate for money to keep HIV-VAC's research going, Murray turned for help two months ago to a Bay Street booster firm called Chase Equity Group. Together they plotted a strategy to attract investor attention to the company so it can raise money to fund the next round of research.
Chase is a small, one-year-old investor-relations firm hired to "increase the audience size" for HIV-VAC by talking to stockbrokers, analysts and investors as well as nosy reporters. "Our job is to give out the facts about the science behind the company and its management," says Chase's Domenic Franco.
Chase is paid on a fee-for-service basis for its work and does not itself hold any HIV-VAC stock, he says. The HIV-VAC buzz has been good for the Chase Group. It has had a lot of calls seeking promotional help from other companies as a result of the attention garnered by HIV-VAC.
Murray himself has been hyping the company with news releases like the mid-June missive that claimed HIV-VAC was "in the final stages of completing a $5-million funding package from an Australian investment firm... based on a convertible preferred stock series with a strike price of $5." He won't give details about the possible investor.
Murray's news release seems to cut very close to the line, as it gives the impression that the company's stock may be worth up to 10 times what it has actually been trading for. The announcement certainly got Internet chat rooms chattering. This little gem appeared on the Raging Bull chat room:
Big time "Looks like some are in the know as Hivc (the company's stock symbol) traded well over 5 Mil shares today -- up Big Time. If the expected news is released, some say Hivc will hit well over $5 U.S." The following postscript was added -- "If Hivc has the cure for AIDS, these stocks will rocket to the moon."
Another suspect Internet chat site rated HIV-VAC a "strong buy," saying the company had projected revenues of $142.8 million and earnings of $63.1 million for 2002. Again, Franco says neither he nor Murray was the source of this misleading information.
In fact, in a recent SEC filing, HIV-VAC says it had a loss of $270,712 for the six months ended March 31, 2000, and had spent $185,000 to promote its stock.
Murray readily admits HIV-VAC is just a shell with no money, no immediate prospects other than lots of hope, hype and its NASDAQ stock listing. "We believe we're way ahead of anyone else.... It's a tremendous speculative investment," Murray says.
Both Murray and Franco say they have no control over what others are saying about the stock and its prospects, particularly on Internet bulletin boards. And Murray says neither he nor his two UK partners sold any stock during the June surge, but the trading frenzy did make them millionaires, at least on paper.
Genuine interest Murray believes there is a lot of genuine interest in the stock because "the stock is so low and the potential rewards are so high."
But Domenic LoParco, an investor relations specialist who is a keen observer of speculative biotech stock plays, cautions investors about making decisions based on Internet hype.
"There are a lot of scams in the biotech arena that can make science sound sexy," he says. The real question that needs to be asked of HIV-VAC, he cautions, is, "Is any of it true?"