For years, the founders of CellCyte Genetics relied on infusions from angel investors to keep their tiny startup afloat. But after the Seattle biotech combined with a moribund public company, its shares rocketed this fall in the loosely regulated over-the-counter (OTC) market and on Germany's Frankfurt Stock Exchange, writes Angel Gonzalez in The Seattle Times.
A wave of glossy brochures and spam faxes, touting CellCyte with lofty claims, has helped propel its total market value to more than $440 million, which is greater than many biotechs in the Seattle area that are far more advanced in developing therapies, the paper writes. Suddenly, the two founders each have a stake worth about $137 million, the paper notes. Last March, the stock traded at $4.75 and today trades around $7.36.
The barrage of hype has been bankrolled, to the tune of hundreds of thousands of dollars, by an outside stockholder - a man whom Canadian securities regulators have barred from their industry for 15 years. Gary Reys, CellCyte's ceo (see photo), says he is not concerned about that history, and insists he has no role in the promotional push. He says the skyrocketing trading volume is simply an "amazing" show of investor confidence in his company's technology for manipulating stem cells, which is still a year away from its first early-stage clinical trials, according to the Times.
CellCyte bought an inactive British Columbia mining company whose stock trades in the OTC market in the US, and completed a private placement that let a well-known Canadian promoter of penny stocks acquire millions of shares, the Times writes. A few months later, the spamming began.
As Reys says, amazing.
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