The Secret to Making 2000% in Stocks Overnight, the Anavex story.
The rise, fall and rebirth of Anavex Life Sciences, a ghost from the past preying on people’s hope.
During the week of November 2nd, 2015, a promotional “newsletter”, run by a site claiming to sell stock “research” and investment advice named Agora Financial, was sent around urging investors to jump on a little known stock, trading for about $9, that was about to, with almost complete certainty, rocket overnight to $200, or a gain of 2150%, and even further hinting that the stock could be worth as much as $900 or a 10000% gain. In true infomercial fashion the promotion encouraged the audience to act now to not miss the chance to “be in for the wealth-ride of a lifetime.”
Enters Anavex Life Sciences, a tiny company with less than 10 employees (until recently had less than 5 employees) based in New York City, trading under the symbol AVXL, and the subject of this promotion.
According to the Agora Financial author the value of AVXL was about to rise overnight to $6.5 billion, if not $30 billion(!), a staggering amount for such a small entity that has never generated any revenues, has virtually no assets, and was trading for $0.65 per share(worth about $20 million in total) in early 2015.
The only problem with this very appealing proposition is that the REAL SECRET to making 2150% in stocks overnight is… THAT YOU DON’T, it doesn’t happen, and people that claim otherwise are only trying to depart you from your money.
In recent years the Biotechnology sector has enjoyed incredible growth and stock prices appreciation, on the back of new technologies/breakthrough in science, investors increasing interest and M&A activity. (For a more detailed view see a previous article: The Golden Age of Biotechnology). This has allowed very early biotechnology ventures to get listed on the stock market and attract very large amounts of capital, one that has attracted a lot of attention and raised a lot of eyebrows: Axovant(Symbol:AXON)
One of the side effects of stock market exuberance and massive amounts of funds flowing to one sector, like we have seen for biotechnology recently, is that it creates very fertile grounds for some operators to deploy stock promotion operations, exploiting investors enthusiasm and eagerness to participate in the next big run, to separate them from their savings.
Gold mining ventures(especially hailing from Canada…) are often used for “pump and dump” schemes(a good definition: here). Operators claim to own rights to vast land areas under which they claim lie untold gold riches that one day will make investors fabulously rich, claim that is almost impossible to verify and offer a great excuse to raise money all the time(mining is expensive and you have no cash flow until you strike gold). In most cases the claims are complete fabrications.
Similarly with biotechnology, the claims of untold riches, rather than being buried underground, are buried in the test tubes, very difficult to verify and an outcome in the distant future. Like mining it offers plenty of justifications to raise money all the time(drug R&D and trials are very expensive and you have no cash flow until you strike gold, FDA approval, so having no revenues is not out of the ordinary), the perfect setup for pump and dump schemes taking advantage investors hopes and dreams of striking it big.
The case of Anavex Life Sciences; AVXL made its debut as a publicly traded company in 2006 via a reverse merger, trading on the loosely regulated OTC market where the reporting requirements are very limited, and claiming to develop a number of molecules and compounds potentially holding the key to the treatment of numerous diseases and conditions(cancer, alzheimer, diabetes, you name it…).
This debut was accompanied by a fanfare of promotional press releases, for instance in early 2007 Anavex was announcing in a PR “its strategic vision for growth by discovering and developing cutting-edge drugs against neurological diseases” and shortly after, in another PR, “its strategic vision for growth by discovering and developing cutting-edge drugs against solid tumors”… All the while the stock was heavily promoted.
The stock was the subject of another round of heavy promotion in 2009–2010, in this 2009 presentation Anavex claimed once again to have a diversified pipeline of drugs under development and to potentially generate $6 billion of yearly revenues by 2020(yes billions…)
None of this ever came to pass but in the meantime, as a result of the constant PR and promotional activities the stock enjoyed 2 episodes of steep price appreciation that allowed for various financing schemes to be arranged and stocks to be sold during the run ups, they were inevitably followed by steep stock price declines.
A number of the people involved with Anavex Life Sciences at the time (2006–2011), namely the CEO, CFO, COO, have now been linked to numerous penny stock operations that were used as the vehicle of “pump and dump” schemes listed on various exchanges, mainly in Canada.
Over the years since its debut as a public company, Anavex management seems to have been either, incredibly picky regarding the preferred location from which to conduct its operation or trying to emulate some sort of around the world “Catch me if you can” story. From British Columbia to now New York, via Switzerland and Greece, so far no less than 7 different headquarter locations in less than 8 years for Anavex Life Sciences…
One thing that has never changed over the years for Anavex, since 2007, and over the different episodes of promotional activities, is the presence of the same investor relations/PR firm based in Canada, Primoris Group(firm whose direct phone number in Toronto appears on every Anavex PR since 2007 to today). Anavex appears to be an important but odd client for Primoris Group, its main client base seems to be mostly OTC gold/mineral mining ventures from Canada, most of which seem to undergo episodes of sharp price spikes before drifting back down to near $0(refer back to comments above regarding OTC Canadian mining ventures…) While it is claimed that Anavex Life Sciences is now a very different company with a different management this link to Canada and promotional activities endures.
From 2006 until 2013, while it is unclear if and when any real drug development seemed to have taken place, Anavex always kept with its habit of regularly releasing optimistic PR updates, but the stock kept drifting lower and lower until the Spring of 2013, when a new episode of paid promotional activity seemed to have taken place as exhibited by this notice from the British Columbia Securities Commission circulated after it had ordered the suspension of trading in Anavex shares following unusual activity and reports of paid promotions. (All instances of promotional activity surrounding penny stocks schemes are always reportedly financed by “third parties” made to appear as having no connection to the company or the company insiders.)
Coincidentally(?) and shortly thereafter, in July 2013 a new financing arrangement, taking advantage of the recent run-up in the stock price created by the paid promotional activity, was announced, to the tune of $10 million with an entity called Lincoln Park Capital(more on that later) and a new CEO was appointed. It seemed like a new era was starting for the company, and the frequency of press releases and promotional activity picked up again, with now a more narrow focus on Alzheimer’s disease. At the time the company seemed to have only one full time employee the new CEO.
At the end of 2014 another “financing” with Lincoln Park Capital was announced(in that announcement Lincoln Park was described as a “long time investor” in Anavex), and shortly after, the news, that an actual trial for the uses of one of the Anavex compound(Anavex 2–73) in the treatment of Alzheimer’s disease was going to take place, was released.
This was the start of a steep year long run-up in AVXL stock price, the stock climbing from about $0.65 in late 2014 to more than $14 during the week of November 2nd, 2015. In late October 2015, AVXL even managed to get itself uplisted from the OTC exchange to the Nasdaq giving more credibility to the story and participating in boosting the stock price.
Taking advantage of this incredible price appreciation, 2 days before being uplisted to Nasdaq Anavex inked a new “financing” with Lincoln Park Capital this time to the tune of $50 million, this deal was filed with the SEC on October 26, but curiously it was not the object of the usual promotional press release.
When Anavex made a big “financing” deal with Lincoln Park Capital in July 2013, it was in the wake of, as flagged by the BCSC, heavy paid for promotional activity. There is very little doubt in my mind that the recent run-up in price has been helped by heavy promotion activity as well, Agora Financial being probably just one among others.
On this data gathered via HedgeChatter(HedgeChatter is a service using data mining algorithms to detect, across all social media channels, unusual activity or manipulation on stocks) we can see that, on Sunday November 8, this tiny obscure company was being talked about on social media and message boards more than any other by a very wide margin with most messages(71%) being flagged as spam.
This small company stock, unknown to probably 99% of the investing public, rising way past the most popular(AAPL) or most debated(VRX, MNKD) stocks on financial media by a very wide margin can only be the result of active promotion and spam.
At $14, based on 33,789,938 outstanding shares of common stock (according to the lastest SEC filing), Anavex Life Sciences was valued at approximately $470 million dollars, once again a staggering amount for a tiny company with less than 10 employees, that has NEVER generated any kind of revenues, $0, or inked any partnership generating milestone payments(a frequent way development stage biotechnology companies can show revenue and are financed) throughout its entire existence, and has virtually no assets recorded on its balance sheet other than the cash regularly delivered by Lincoln Park Capital in its bank account .
Avanex Life Sciences seems also to have had some very peculiar recruitment practices, of the 4 employees(other than the CEO) that appears to be operating in NYC, and that can be identified via LinkedIn, one apparently was recruited as a “Financial Analyst”(title now changed to “Business Consultant” since this publication)in May 2015 after being a buyer for an automotive and industrial parts wholesaler for 9 years(one may wonder with Anavex being so small, having no revenues and having extremely simple financial statements what “financial analysis” needs to be performed…).
Another employee recruited sometime in 2014 as “Director of Business Development and Investor Relations”, other than an ongoing career as a runway model and while having graduated with a neuroscience degree and likely very bright and talented, seems to have no prior professional business experience or experience of the biotechnology industry, which would seems like an odd recruit for a biotechnology company eager to line up partnerships and business deals on the eve of a big drug discovery milestone.
Only the other 2 employees, one recruited very recently in September 2015 and the other in July 2015, show some solid resume with biotechnology industry background.
Let’s now examine how the Lincoln Park Capital(LPC) financing arrangements are setup and my interpretation of the motives that lie behind them. On the surface when announced the deals almost sound like LPC is cutting a check for $10,000,000(size of financing commitment announced in July 2013) to Anavex Life Sciences while in reality it fronts no($0 in the most recent $50M agreement) or very little($100,000 in the July 2013 agreement) cash to the company, it only agrees to purchase new shares issued by the company at a discount to the market price that day.
In the deal inked on October 26, 2015, for $50,000,000, Anavex agrees to sell to LPC newly issued Anavex shares at the lowest price quoted that day or at the average of the 3 lowest close of last 10 trading days.
In this agreement LPC makes no commitment of holding these shares for more than 1 day, 1 hour or 1 minute.
Knowing in advance that you will be able to buy a stock at the lowest price of the day or at a certain discounted price in the future gives you incredible risk-free arbitraging opportunities, especially when one contemplates the following subtle detail of the transaction:
In the Purchase Agreement LPC expressly agrees to engage in “no short selling or hedging” of AVXL common stock, but in my opinion if one look closely, one detail of the transaction purposefully allows LPC to do exacly that.
With the execution of the “Purchase Agreement” Anavex agreed to issue LPC 179,958 newly issued shares for free. LPC can now use these free shares in their account as a “float” to sell shares in the market in advance of the shares they will purchase later at a discounted price(the lowest quoted price of the day), effectively engaging in a transaction akin to shorting the shares they will cover via purchase later, while on paper it can be claimed that LPC is transacting from a long position.
One can imagine a scenario like this, LPC starts the day with the full balance of the 179,958 free shares, during that day they sell in the open market at various price points 50,000 shares, end with a balance of 129,958 shares; at the end of the day they go to Anavex that issue them 50,000 new shares at the lowest quoted price of the day and the balance is replenished to 179,958 shares, LPC can now repeat the same transaction the next day, effectively shorting the stock with the appearance of being a long seller.
Using the same scenario example, that same day AVXL stock fluctuates between $10 and $11 and LPC manages to sell the 50,000 shares in the open market at an average price of $10.50, at the end of the day they purchase 50,000 shares directly from Anavex at $10.00 the lowest price of the day, pocketing $0.50 per share, a $25,000 completely risk-free profit and delivering $500,000 of fresh cash extracted from the marketplace to Anavex bank account, basically, in this example, a 5% commission to transfer funds from retail investors to Anavex.
In my opinion, while often characterized as a “long time investor” by the company in its PR announcements, Lincoln Park Capital is not an “investor” but acting as an intermediary between Anavex Life Sciences and retail investors, allowing for the sale to the marketplace of newly issued shares and the pass through transfer of cash directly from retail investors in the marketplace to Anavex Life Sciences bank account, for this service LPC is remunerated via the discount offered on the share purchases and the issuance of free shares.
If you look it up, you will be able to find out that Lincoln Park Capital has been involved in dozens of such “financings” with numerous small ventures listed on various exchanges, number of them also coming with numerous red flags, among them a number of “Canadian gold mining” operations(one of the most frequently used narrative to run “pump and dump” schemes). (This article from TheStreet use another biotechnology example to shed more light on LPC financing deals)
In most cases the stock price of the ventures involved in deals with LPC declines sharply in the following months likely due to the added selling pressure of Lincoln Park Capital constantly selling newly issued shares and the significant resulting dilution.
(Illustrating the dilution, change in outstanding AVXL shares as a result of various financing arrangements since 2013, number of outstanding shares:
September 30 2013: 37,237,588
September 30 2014: 47,200,237
September 15 2015: 124,503,297 a very significant dilution, one 2015 share representing less than 1/3 of the ownership in the company it did in 2013.)
Offering shares directly to the retail public demands more registration requirements which implies more due diligence and audit and the involvement of underwriters, especially for a Nasdaq listed company, all tests that, in my opinion, Anavex Life Sciences would likely never be able to pass given all the red flags. (Again it is interesting to note that this latest “financing” was inked for a very large amount $50M and a long duration 36 months, only 2 days before AVXL was uplisted to the Nasdaq, when the company still qualified as an OTC listed company where the reporting and registration requirements are much lighter).
It appears to me, that throughout its entire existence, and at an accelerated pace in the last 2 years, Anavex Life Sciences has constantly been issuing and selling new shares using similar arrangements(Purchase Agreement, Dilutive Convertible debt issuance) with the coincidental support of heavy promotional activities deemed to have been paid by “third parties”.
To date $73,000,000 have transited through Anavex Life Sciences, of that amount about $20,000,000 seem to have been extracted from the investing public via various Lincoln park Capital “financings” and other arrangements in just the last 1 year, and yet, as we have seen, the company has virtually no tangible assets.
This staggering amount of money, for such a small entity, raised throughout its existence, appears to have been extracted from the venture via various means mostly via lavish salaries and perks. One interesting fact to note is that in a filing from 2013(the last year this expense was broken down F-6) it showed that Anavex had spent more than $12,000,000 in consulting fees to date, an amount that seems in my opinion incredibly high for such a small operation.
In this current incarnation Anavex Life Sciences appears to be very generous with its management, namely the CEO, according to the company filing here, Anavex Lifesciences CEO was awarded compensation worth $2.66 million for the year 2013 and $650,000 for the year 2014, a level of compensation on par with what CEOs in the sector are paid for jobs at companies employing tens if not hundreds of employees. In any case this sounds extremely high for such a small venture or a biotech startup. As far as one can tell it appears that in 2013 and for at least part of 2014 the CEO was the only full time employee of Anavex Life Sciences, so it seems that he was extremely well compensated for the job of managing himself.
Equally at more than $2,000,000+ for the year 2014, the level of “General & Administrative Expenses” seems also incredibly high for a venture with even 5 employees, and even taking into account the fact that Anavex rents offices at a very expensive address in the famous CBS building(some ventures often like to setup shop in the most prestigious addresses and have a lot of fancy titles in the hope it will help compensate for the lack of substance). Given the fact that the company seemed to have only 1 full time employee for most of 2014, the CEO job must also come with some very enviable perks.
(On Saturday, November 7, 2015, Anavex Life Sciences presented the trial data that was advertised has revolutionary and groundbreaking in the promotion referenced at the beginning of this article, and was portrayed as the starting point of miraculous gains, I will refrain from commenting on the data at length since a number of people have already given opinions and from what I can gather it appears to have shown not statistically significant results and a flawed trial(a very small “n” called Phase2 trial(while designed like a Phase1) that was unblinded and had no placebo control arm.))
In my opinion the trial was successful in its main purpose: creating a run-up in the stock price and give some material for coordinated promotion operations.
To conclude, Anavex Life Sciences(AVXL), appears to be somewhat of a phenomenon in the world of stock promotion schemes for its longevity, sophistication and scale.
In an era where unprecedented amounts of funds are, and have been flowing into the biotechnology sector over the past 5 years, chasing any investment opportunity/asset with the slightest chance of success, it seems very unlikely that any asset holding a possible chance at a major breakthrough in the treatment of Alzheimer’s disease(an obviously very large market) would be left drifting and dormant for someone to come around and pick it up for pennies.
In 2015, the biotechnology company Biogen, with a $2 billion/year R&D budget, has signaled that it was setting aside $2.5 billion to further its multi year effort in finding a treatment for Alzheimer’s disease.
To think that anybody would believe and buy into the story that a tiny company that was valued at less than $25 million in early 2015 with less than 10 employees, no tangible assets, a checkered track record, a history of stock promotion activities, and spending more money on CEO compensation and office/G&A expenses than anything else, including R&D expenses, was about to deliver a major breakthrough in the treatment of Alzheimer’s disease, is incredible.
In my opinion, Anavex Life Sciences(AVXL) is either:
- at the very minimum, a very risky venture with very little chances of success, having a lot of red flags attached to it, that would normally repulse any reasonable investor doing the smallest amount of due diligence, and worth a very small fraction of the valuation it is currently trading at;
- or at the worst an operation setup for the sole and unique purpose of enriching insiders at the expense of unsuspecting retail investors, and only valuable for the insiders, connected parties and network of people taking part in the promotions, but otherwise toxic and worthless for investors.
After studying the history of Anavex from its inception to today, it appears in my opinion, that the only business Anavex Life Sciences has really ever been in, has been the business of filing, issuing and selling new shares of little to no value to the unsuspecting public, on that count it seems to have been an extremely successful venture…
For additional information on the Anavex Life Sciences connection with Canada read this blog post: Sandra Boenisch, Vancouver’s finest, CFO to the stars — AVXL, NAKD, LINCOLN PARK via @BuyerStrike
In the HedgeChatter report here, a case study detailing how social media activities/spam/promotion were detected and correlated with price movement. Ironically the case used to illustrate the study, Galena Biopharma, after all this spam/promotional activity inked a $55 million financing deal with… none other than Lincoln Park Capital…
All the information used in this report was gathered from filings filed by the company with the Securities and Exchange Commission, from material distributed by the company and from publicly available sources. To consult all up to date Anavex Life Sciences SEC Filings: Here
Always perform your own due diligence before investing in any securities and always refer to the latest official filings of the company with the SEC.
To report securities fraud, stock manipulation or suspicious activity contact theSecurities and Exchange Commission here
Disclaimer: The author currently holds no long or short position in the common stock of Anavex Life Sciences or any related securities or derivatives and does not plan to do so in the future.
POST-SCRIPTUM: Some more Context on Stock Promotion Schemes
Generally, stock promoters like to latch on the latest sector to have seen a big run up in prices, I can remember in 2000 seeing a few of these fictitious companies claiming to hold the future to optical networking, 3 years ago a number appeared advertising their incredible potential in the rare earth mineral space, and in 2013–14 a few were advertising their potential in 3D Printing on numerous finance related websites. (Often, after the pump & dump has occurred, and the stock is back down to a few pennies, the company is re-branded with a new fictitious narrative and the cycle starts anew, PUGE, featured in the add below as a 3D printing tech company, has now according to PR “Entered the $150 Billion Online Travel Industry With a Proprietary Algorithm”…)
This past Summer 2015 I came across one completely obvious and blatant pump and dump scheme named Rainbow Biosciences (symbol: RBCC), a 1 employee aquarium supplies company with no assets incorporated in Nevada, based in Florida, (Canada, Florida, Nevada is often a common thread in these schemes) pretending to have morphed into a groundbreaking biotechnology company.
RBCC was advertising investing in its stock via display adds on various finance websites. (Any company advertising its stock in this manner or on which paid promotion are being circulated should be an immediate red flags and always avoided).
RBCC, like most of these schemes, was incessantly distributing promotional press releases updating investors on the “progress” of the company, most of it nonsensical and likely completely fabricated. The only purpose of this type of constant promotion and of paid promotional activities is to create a run up in the stock price into which people connected with the operation and holding large blocks of stocks acquired for pennies if not issued to them for free will sell(dump) their holdings.
By the look of the chart the operation seems to have been a great success:
Generally, after the run-up has ended, the dump taken place and the stock inevitably collapsed, the promotional activities will stop and the frequency of PR from the company will decrease if not completely stop. Often a number of months or years later the stock will be used again to reactivate a scheme with a new name and a new story, generally by the same network of people involved the first time around. (Excellent article on RBCC and a network of other stock promotion schemes: here )
(during the week of November 2nd, 2015, I started posting on Twitter the troubling facts concerning Anavex Life Sciences that I came across, I will paste them below as a complement to this report, and will keep updating and adding to the list)
Observations, comments, disagreements or questions reach me on Twitter:Jean Fonteneau