reprint from april 13 , 2021
disclosure
Securities registration forms should be boring affairs. Insiders that want to sell securities require them to be registered with the SEC before hoisting them on an unsuspecting public. The securities may be common stock, options, warrants, or other derivatives convertible into common stock. Lawyers draft prospectuses of risks and disclosures. The SEC comments, lawyers respond, and the SEC then gives effect to the prospectus so the sellers can sell.
These S3’s are more important in microcap securities land than say for the Ford Motor Company. Microcap securities tend to be listed corporate shells given life by breathless capital, paid digital promotion, and promise of the next big thing by management recruited from the nearest saloon.
These securities are pumped and dumped into the accounts of dentists by underwriters in concert. The circulatory system of capitalism is littered with promises of trees growing to the sky. In microcap land dentists enrich the saloon keepers.
Oramed took $50 million of Chinese money in 2015, a grant from the Israeli government, and promised a pill for oral insulin that would overcome gastric juices. In the S3 filed by Oramed it lists three products. Oral Insulin, ORMD 0801, for insulin to travel through the portal vein to the bloodstream from the gastro tract. Sounds complicated. It is. Another that stimulates the secretion of insulin from the pancreas, balances blood sugar, and decreases appetite. The third is a combination of the first two. And the fourth for weight loss. Oramed claimed to have conducted clinical trials but there are no results available in public databases or peer-reviewed studies.
truth passes in the night
Oramed is clear that it should be considered a company in pursuit of oral insulin. The Oramed S3 dated February 2021 makes precisely no mention of any Covid 19 related products.
In an 8k filed on 19 March 2021 Oramed proposed a $1.5 million investment in a new shell company, Oravax, along with a licensing agreement for the use of Oramed’s proprietary Covid 19 vaccine along with Premas Biotech. Yes, that proprietary Covid 19 vaccine was not mentioned as an Oramed product in the S3 one month earlier.
Oramed would receive 63% of Oravax shares and curiously one out of three board seats. Akers Bioscience would be a 13% shareholder contributing $1.5 million and what is left of another shell company, Cystron, that has a tortured past. And Premas would receive $1.2 million-plus trinkets for what is not clear.
At no time in Oramed’s company history was there even an inkling that it had solved oral insulin and was moving on to the business of vaccines and Covid 19 in particular. The Oramed S3 was filed for selling shareholders to sell 3 million shares at 8.00 a share or about $24 million as the crow flies.
The sellers need Oramed to trade above the offering price if for no other reason than to be short against the box. A fancy term for the underwriters to borrow and sell the stock above the offering price, say $10.00, knowing that at least 3 million shares could be bought for $8.00 in the offering or $6 million in a box locked on both sides.
Digi ratings agencies were paid $100,000 to opine that the new Oramed business plan would be worth $400 million with a 64% probability of approval apparently in this lifetime. The stock traded from $9-$12 on ten times average volume and conveniently remains above $9.00.
mirage
Is it that simple? Migrate from a nonexistent pill for oral insulin to the promise of a Covid 19 vaccine in a press release? Pay for promotion? Cut in the underwriters? Exit stage left?
sellers, armistice
Who are the sellers?
By June of 2020 Armistice owned 30% of Vaxart shares and Mssrs Boyd and Maher sat on Vaxart’s Board of Directors. Warrants to buy shares were recast in terms of price and amount. Misleading statements were made by Vaxart management that it had developed a pill for Covid 19 and that it was in the US Government Warp Speed program. The shares traded from $.35 to $17 with Armistice and management selling on the way up. Armistice made $197 million and CEO $28 million.
There was no pill and Vaxart was not part of the US government program. The directors resigned. A grand jury was empanelled. And claims percolate through courts including the Delaware Chancery Court.
underground
Yes. Delaware. Delaware became what New Jersey was to corporate formation one hundred years ago. There are many legitimate reasons for Delaware corporations, most relate to taxes, but important is the indemnity for directors and officers of corporations.
Oramed has cleared any confusion in its S3 explaining that it will indemnify directors against any civil or criminal investigation provided the miscreants did not believe their conduct to be criminal. An interesting standard. Oramed will make advance payment for costs incurred by miscreants to defend themselves even in matters related to the SEC which for its part has objected to this provision as a matter of public policy.
Thinking about this a little harder. Oramed filed the S3 requesting permission from the SEC for shareholders to sell 3 million shares at $8 a share for $24 million. Armistice Capital wants to sell shares worth $8 million while it is in full flight from the SEC enforcement division, Department of Justice, and a tsunami of civil suits for its pump and dump of $197 million worth of Vaxart shares.
If the SEC, the DOJ, or shareholders decide to pursue Oramed, the management team, and the board responsible for questionable decisions the defense fees will be paid by shareholders while the SEC objects as a matter of public policy.
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