The Solv-Ex Story

Solv-Ex Corporation was formed in July, 1980 when Samuel A. Francis, a convicted securities fraud felon, teamed up with John S. Rendall to allegedly arrange a financing to commercialize certain patents owned by Mr. Rendall. Mr. Francis issued himself 1,750,000 Solv-Ex shares for approximately $0.05 per share and granted Mr. Rendall 2,700,000 shares in payment for rights to his patents. Shortly after these transactions Solv-Ex went public through a best efforts offering of 4,000,000 shares at $1 per share. Almost immediately thereafter, Solv-Ex was accused of fraud by U.S. Congressman Michael Synar. In total Solv-Ex sold at least an additional 18 million shares without ever registering one share with the Securities and Exchange Commission. It did this through a long series of private placements and off-shore Reg-S offerings. In the end in July 1997 Solv-Ex had obligations to issue shares to Reg D and other convertible security holders that far exceeded the 30 million shares Solv-Ex was authorized to issue.

On October 7, 1996 Asensio & Company published its initial strong sell report on Solv-Ex. At September 30, 1996 Solv-Ex had over $28 million of cash, had $40 million invested in its plant and was supposedly finalizing its construction. Solv-Ex and its promoters were forecasting up to $3 of earnings per share in 1997 and its stock price reflected investors’ confidence in this estimate. Asensio had an entirely different opinion. Asensio did not believe that Solv-Ex’s plant would ever produce bitumen commercially or that Solv-Ex’s management would ever create any value with its remaining $28 million. In fact, Asensio forecasted that Solv-Ex would never generate any revenues much less earnings. Solv-Ex’s management characterized Asensio’s reports as unbelievable, baseless, self-serving short-seller propaganda.

By January 1997, Solv-Ex was claiming its plant was ready to produce large quantities of high grade bitumen at very low cost. Costs that were lower than all other far larger existing operators. Information was difficult to obtain on Solv-Ex’s plant, which was located in Fort McMurray, thirty miles north of Edmonton, Alberta in Canada. However, through interviews with Fort McMurray residents and aerial photographs it was clear to us that Solv-Ex’s plant was not only completely unfinished but a mere junk yard full of inoperative equipment. Solv-Ex denied these indisputable facts and announced it would commence production by April 1, 1997. (In fact on April 1, 1997 Solv-Ex actually claimed it had started production.) Asensio & Company issued a total of eight reports giving a highly detailed account of the inoperative condition of the plant. Management claimed that Asensio’s reports were untrue. In the end Solv-Ex’s cash vanished without a trace, management had sold shares and its stock was delisted and collapsed.

All of the following reports were published by major news wires and several led to newspaper stories. Solv-Ex claims that our criticism was unfounded. Solv-Ex claimed that Asensio & Company issued the reports to profit on its short position. We responded that Asensio was short because our reports are true and correct and that it was management’s reports that were false and untrue. Unfortunately, many investors held or bought Solv-Ex’s stock long after it was worthless.