The promotions have been appearing at a rapid pace. We keep hearing about products that are supposed to test for, or protect against, anthrax. And here is what we find most puzzling: most of these anti-anthrax devices are being developed by small, under-capitalized companies that few investors had even heard of before September 11th. Last week we looked at Vital Living Products, Inc., an OTC Bulletin Board company that recently announced plans to market an anthrax testing kit. That Company’s stock soared on the “news,” but scientists remain skeptical about the kit’s validity, and some retailers have been hesitant to place it on their shelves. (See, Vital Living Products, Inc. (OTCBB:VLPI) – Just The Anthrax, Ma’am; and Update: Vital Living Products, Inc. (OTCBB: VLPI) – Deny, Deny)
Virtual Living Products is just one example of the new wave of companies that have been promoting “anti-anthrax” products. There are others – and we will be reporting on several of them in the coming days. Are these companies behind the promotions, or is someone else promoting shares and trying to “pump” stock prices? Consider this recent “news” about a company called First Scientific, Inc.
We first saw the following cryptic message posted on the Yahoo! Finance Message Boards on October 25th:
go with FSFI [First Scientific] tomorrow/working with CDC for anti-anthrax skin cream.. news should be out soon... stock was $3.50+ for year high and now just .20 see you in dollars next week early!”
Then we saw this message, on a different Yahoo! Finance Message Board, sounding a similar theme:
Look at FSFI today! get in before too late... this is the next VLPI [Vital Living Products] and then some.
Other messages, in the same vein, began to appear on various message boards. They seemed to be suggesting that FSFI was developing an “anti-anthrax” cream under the watchful eyes of the Centers for Disease Control. Lending an air of credibility to these rumors was the fact that First Scientific is in the business of developing and marketing antibacterial lotions, sprays and wipes. But while First Scientific has indicated that certain of its products have proven effective against “a broad spectrum of pathogens,” and can remove “99.99% of disease-causing bacteria,” the Company has not claimed that they are effective against anthrax. Indeed, First Scientific has not issued any statement that would indicate that these products have even been tested for use against anthrax.
This would suggest that the message posters either have “inside information” about First Scientific, or that they have fabricated this “news” in order to pump the stock. Either scenario is troublesome since it is unlawful to trade on non-public inside information, and equally improper to make up “facts” to promote securities.
In any event, the messages have had a dramatic effect on First Scientific shares. A pattern began to develop about one week before the messages first appeared. On October 9th First Scientific stock had closed at 3 cents a share, with just 200 shares traded. On October 18th – one week before we noticed the first messages - the stock was still at 3 cents, but 67,000 shares were traded. The following day, October 19th, the stock price rose to 5 cents, on volume of 703,000 shares. Then on October 22nd, 479,000 shares were traded and share prices increased to 9 cents. Volume continued to grow - 841,000 on October 23rd and 350,000 on October 24th.
Was someone accumulating shares in anticipation of the “anti-anthrax” message posts? On October 25th, when the first messages appeared, First Scientific shares closed at 19 cents – more than doubling in value that day - as 3.4 million shares were traded. On October 26th another 2.6 million shares changed hands, and prices hit a high of 24 cents before closing at 12 cents.
Investors may be responding to the “messages,” but, if so, they are operating with no tangible information. So far, the Company has remained silent. Is First Scientific aware of the rumors? Are the anti-anthrax tests underway – and if so, where are they being conducted and by whom? Investors need the facts.
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