Companies featured in this edition of the newsletter: GERS, GNBT, SWYV, PCFG
Given the developments of the past year, it should come as no shock that there was no holiday rally to usher in the New Year, but all things considered, things ended in a fairly tame fashion. The Dow ended the week down 64 points to close at 8515, bringing its year to date losses to 35.8%. The Nasdaq faired slightly worse, losing 34 to close at 1530, down 42.3% on the year, while the S&P 500 and Russell 2000 ended the week down 1.7% and 2% respectively.
Despite the short week, there was still time for some less than stellar economic reports to send stocks lower, as home sales and jobless data sent many investors heading for the exits during early trading. November existing home sales declined from 8.6% in October, and new home sales hit their lowest level in 17 years. Initial jobless claims set another new 26 year high at 586,000 and durable orders declined 1% in November while personal income and personal spending for the month fell 0.2% and 0.6% respectively. The tough economic news for the week was capped off by the announcement that final Q3 GDP was negative 0.5% for the quarter.
While it was a slow week due to the holidays, there were some reasons to be merry, as perhaps the retail season might not have been as disastrous as previously forecasted. SpendingPulse, a division of MasterCard that tracks consumer spending, said that its preliminary data show that online sales slipped only 2.3%, while overall retail sales lost somewhere between 2% and 4% (excluding autos and gasoline) over the comparable holiday period in 2007; a far cry from the apocalyptic declines expected before the season. In related news, Amazon.com announced that this was its best holiday season ever, further suggesting that perhaps the preponderance of dour pre-season forecasts might have been a bit shortsighted. While it was certainly not a banner year for retailers, things could have been much worse given the overall state of the economy at present.
What should investors look for this week? It will be another abbreviated session due to the holidays, with equity markets closing early at 1:00 p.m. on Wednesday, New Year’s Eve, and on Thursday, New Year’s Day, markets will be closed all together. There will be no earnings releases of note due to the holiday shortened week.
The economic calendar will be light again this week due to the holidays, but look for Chicago PMI for December at 9:45 a.m. on Tuesday followed by December Consumer Confidence figures at 10:00 a.m. On Wednesday, look for Weekly Initial Jobless Claims at 8:30 a.m. and the ISM Index for December will be released at 10:00 a.m. Friday.
There are no major conferences of note scheduled for this week.
Drug delivery company Generex Biotechnology (NASDAQ: GNBT) continues to advance towards full scale global commercialization of its Oral-lyn proprietary oral insulin spray, as it said that Lebanon’s Ministry of Public Health has approved Generex Oral-lyn, for importation, marketing, distribution, and commercial sale in the Republic of Lebanon for the treatment of adults and children with Type-1 or Type-2 diabetes mellitus. Distribution will be handled by Benta SAL, the largest supplier of medical devices and pharmaceutical products inLebanon, whose sales force will offer the product throughout the country, covering 1700 pharmacies, 175 hospitals and 23 wholesalers, in addition to public health institutions and dispensaries. Benta also will implement a continuing medical education program to introduce the product to endocrinologists, diabetologists and physicians in Lebanon. Shares lost 14 cents on the week to close at $0.34.
Diversified holding company, Seaway Valley Capital Corporation (OTCBB: SWYV), has announced that its subsidiary, Patrick Hackett Hardware Company, will soon begin trading as its own entity. Seaway Valley has acquired 88% of the voting shares of Florida-based The Americas Learning Center (OTC: ALRN) and transferred its shares of Hackett’s into the company. As part of the transaction Seaway Valley has filed with the State of Florida and the NASD to change the name of the newly acquired company to “Hackett’s Stores, Inc.” and has also filed for a reverse split. The company believes that by spinning-off Hackett’s as a stand-alone entity, it will help both unlock the value of Hackett’s to Seaway’s shareholders and also make it easier for Hackett’s to directly access the capital markets for growth and financial stability. The stock remained unchanged at less than a penny on the week.
On the Wires: Mining and exploration company Pacific Gold Corp. (OTCBB: PCFG) has announced that they have terminated the services of their independent registered public accounting firm, Robnett & Company LP. The decision to change independent registered public accounting firms was approved by the company’s Board of Directors and was not based on any disagreements between the company and Robnett on any matter of accounting principles or practices, financial statement disclosure, or procedure.
SPECIAL SITUATION: Greenshift (OTCBB: GERS) $0.042
In a difficult environment such as the one which we are currently in, good companies with sound business plans often begin to fall through the cracks and are presumed dead as they struggle to find capital, even though there may be nothing fundamentally wrong with the business. One such example is GreenShift, a company that develops and commercializes clean technologies that facilitate the efficient use of natural resources. Despite having a fundamentally sound strategy in a rapidly emerging market, the company’s resources all but dried up as capital markets seized up in recent months, resulting in the company’s stock trading as though it was going out of business.
In recent weeks however, as things have begun to stabilize, GreenShift has seen an influx of capital and shares have begun to surge accordingly. Just last week, the company announced the formation of a joint venture with GE Energy Financial Services and an institutional investor, which has served to breathe some life back into the beaten down shares. Under the terms of the agreement, the newly formed subsidiary, CleanBioenergy, will invest up to $38 million in GS NextDiesel – a newly formed GreenShift subsidiary – to help deploy twelve new corn oil extraction facilities across the country and double the capacity of GreenShift’s Michigan-based NextDiesel biodiesel refinery from 10 million gallons per year to 20 million gallons per year. We find it notable that GE, which has been under a great deal of financial pressure itself, elected to make a sizable investment in this area and chose to work with a tiny company such as GreenShift.
GreenShift’s biodiesel production model is based on the integration of its patent-pending corn oil extraction technologies into corn ethanol production facilities to extract crude corn oil from distillers grain, a co-product of ethanol production. The crude corn oil is then transported to the NextDiesel refinery in Michigan for processing into biodiesel. GreenShift installs its extraction technologies at its expense and then purchases the extracted oil for a price that is indexed at a discount to the price of diesel fuel. This hedges GreenShift’s biodiesel production margins and provides important benefits to participating ethanol clients, including increased revenue, decreased financial risk, and enhanced biofuel yield from corn, in addition to reducing the carbon emissions resulting from production. The company’s extraction technologies are currently in use at four corn ethanol plants in Michigan, Indiana, New York and Wisconsin, with plans to deploy at a number of additional U.S. ethanol plants thanks to their newly formed partnership.
The company believes that their newly formed joint venture will give them the resources they need to scale their corn oil biodiesel model into sustainable profitability, and with net revenues of over $24 million for the first three quarters of this fiscal year and with a market capitalization of less than $10 million, investors may well be able to get into a company that is positioned to grow rapidly at a substantial discount. Shares may continue to rebound due to the influx of capital and increasing global demand for biodiesel, while the company is set to capitalize on its increase in production capacity thanks to this newly formed joint venture. As markets continue to stabilize, commodity prices may rebound to their pre-crisis levels, reemphasizing the need to commercialize a better, more sustainable type of energy production: with this new funding and plans to expand production in place, GreenShift seems extremely well-positioned to capitalize on the growing demand for alternative fuel production.