Wednesday, June 2, 2010

Is George Soros Down to His Last Billion?

Here's a fascinating story brought to the surface by John Hempton: George Soros is placing heavy money with Carlo Civelli.

How does one explain Civelli? Here's how Hempton attempts to do so:
His name alone gets Canadian securities regulators into a lather as he was a major investor and a major seller (in advance of the crunch) of some of the most egregious stock promotes of all time. Delgratia is the most-cited example - where Civelli was allegedly the main backer of a company which had a major gold find. The stock plummeted on revelations that drill samples had been salted - or as the court documents sum up the engineering reports, "any [gold] detected had been introduced after drilling." The salting was done by persons unknown and the chief geologist won a defamation suit when the Canadian press suggested he did it.

Civelli was a backer of another over-hyped resource stock - Pinewood Resources – a stock which announced large finds and collapsed to pennies. There was also Arakis Energy. Arakis sums up what is good-and-bad about Civelli. Arakis - through dealings with warlords - got prospective acreage in Sudan on which they found oil. The quality of the finds was however grotesquely overhyped leading to a run-up and collapse. The company was eventually sold to Talisman for roughly 15 percent of peak price. The CEO - a longtime Civelli associated - agreed many of the nasty facts and settled for a twenty year ban from the Canadian securities industry. The good bit was that there were real resources there - value was created. The bad bit was that - as per many Civelli stocks - it was overhyped.

Note that Carlo Civelli was not charged – and only management received bans. Overhyping is epidemic in the stock market. Moreover there were plenty of good bits in Arakis. There was real oil - and in commercial quantity. Carlo Civelli has - contrary to what his critics have said - backed some valuable resource projects. That Carlo Civelli has backed frauds does not imply that if Carlo Civelli backs it is a fraud. Nor does it imply that Carlo Civelli was involved in the fraud. Both of those are much more dubious propositions.

The most controversial current Civelli stock is Interoil - a company with real gas finds in remote Papua New Guinea and with well researched allegations that the finds are overhyped.
Into this picture steps none other than George Soros. Here's Hempton again:
Still the Interoil bears (and there are plenty) were dealt a body-blow when Soros funds management purchased a large stake in the controversial company presumably after competent due-diligence. Interoil is one of Soros's largest holdings. Sure Buffett buying would confer even more credibility to Interoil - but Soros is a pretty good second best.

This blog however does not want to comment on Interoil - it wants to raise the latest association of Carlo Civelli and Soros funds management. Dear readers - I give you Manas Petroleum and its subsidiary Petromanas into which Soros has invested just over $40 million.

Manas/Petromanas is an unlikely candidate for a large Soros investment. The parent trades on the over-the-counter bulletin board and has used paid stock promoters. It maintains its website in Vancouver rather than in its home base of Switzerland. Petromanas (a listed subsidiary) trades on the Canadian venture exchange and their website is maintained in New York not where their business operations are. Petromanas owns the Albanian prospects of Manas and it is that which Soros is investing in.

These companies are slickly promoted.
So what is Hempton's guess on what is going on? He speculates:

I see three possibilities:

1. Soros has found the well promoted penny stock that really is worth your hard earned cash or

2. The Soros organization have become active participants in penny stock schemes or

3. That Soros organization has a rogue analyst/fund manager who is (knowingly or unknowingly) involved in stealing large licks of money by investing in dodgy promotes run by Civelli and his agents.

Stuffed if I know.
These are all reasonable speculations on some truly unexpected activity. There's one other possibility that makes little sense on the surface, but every time I have seen a heavy hitter head to Vancouver, it's because he is a little light in the liquid cash department.

I remember many years back I wondered why billionaire Saudi arms dealer, Adnan Kashoggi, was playing in the Vancouver penny market. Sure enough, it eventually surfaced that the big spending Kashoggi was having financial problems.

I doubt Soros is down to the cash in his wallet,  and these "investments" are being made through his funds--not necessarily personally, but it might not be the time for a bank to be advancing the man a billion on his signature.

1 comment:

  1. Oddly, I ran across Soros while looking into Cobalt International Energy. Carlyle Group conducted an IPO on deepwater energy Cobalt in Dec. 2009. The stock priced below expectations and has fallen 50% to date:

    Soros Fund Management has 5.9 million shares.