We received reports of a letter sent by snail mail by a ‘James Campbell, geologist and MBA graduate’ promising investors in Crestview Exploration (CRS.C) gains of 500% in the short term and 2400%. The letter is also referring to a Canadian website ‘researchreport.ca’ which seems to be just a landing page to harvest e-mail addresses.
A quick round of googling doesn’t result in any hits for a James Campbell who is both a geologist graduated from Stanford and an MBA graduate of Harvard Business School (we would also expect every Harvard graduate to not mis-spell the name of their alma mater as the letter calls it ‘Harvard’s’ Business School). James Campbell appears to be a fake name, just like ‘Greg Wilson‘, a pseudonym used online.
Upon researching the company, it looks like Crestview Exploration is still in its infancy. The company got listed on the CSE (where the rules and regulations aren’t as strict as on the Toronto Stock Exchange or the TSX Venture Exchange) in September last year, and there are several red flags popping up.
First of all, the most recent financial statements provide an overview of the situation as of November 30th 2019. At that date, Crestview had just C$17,000 in cash and C$51,000 in current liabilities indicating the working capital position was already negative 4.5 months ago. Since November 30th, Crestview has finished a sampling program (Press release, December 2nd 2019) but no assay results have been published yet. Additionally, an aerial survey was completed in February. This means the working capital position will have deteriorated even further since November as Crestview continued to incur expenses.
Crestview confirmed earlier in Q1 it is planning to drill the project in the third quarter of this year, but as the financial statements show, there simply is no money to drill the project. Subsequent to the end of November, 1.4 million warrants expired unexercised, but Crestview raised C$61,000 from C$0.10 warrants and C$231,000 from investors exercising warrants with a strike price of C$0.60. That will keep the company’s lights on for a few more months, but the treasury is likely still running on fumes (the Q1 financials should be filed soon) and the company will have to raise cash before getting back in the field if it wants to do some meaningful exploration (Crestview spent just C$203,000 on exploration) the past two years combined.
Additionally, according to the official filings, insiders have been selling stock in Crestview Exploration. In their defense, most of it was upon exercising options but apparently management didn’t get the memo about the 2,400% gains further down the road nor the C$10 target price that was slapped on by ‘Greg Wilson’.
Glen Watson, the CEO owned 1,000 shares in Crestview, exercised 25,000 options to increase his position to 26,000 shares before selling off 10,000 shares again for total proceeds of C$19,800. This means the CEO currently owns just 16,000 shares in Crestview Exploration. Shares that are basically free as he invested just over C$15,000 in the company but already sold stock to the tune of C$19,800. Unless there are late filings, the current management team of Crestview doesn’t seem to have any real skin in the game other than a symbolic.
There are simply way too many red flags to waste even one additional minute of our time on Crestview Exploration:
- Promotional snail mail (seriously? This is 2020) promising quick gains.
- The company was already out of money four months ago and the recent warrant exercises will only have plugged the hole on a temporary basis. Expect Crestview to tap the equity markets shortly.
- According to the prospectus (found on SEDAR), the founders round initially created shares at C$0.025, C$0.05 and C$0.10. Even if the share price halves, the founders will still be making money.
- We see the insiders selling off their positions in Crestview, which doesn’t signal a lot of confidence in the company’s future.
Anyone who promises you short-term returns of 500% and 2,400% returns on a longer term basis is just letting his mouth write cheques his body can’t cash. Don’t fall for it. The company is out of cash and will most likely have to raise money any day now.
Semi-anonymous letters that sound over-promotional belong in only two places. Either in your garbage bin or on the desk of your province’s securities commission for additional scrutiny.
Disclosure: The author has no position in Crestview Exploration and is staying very far away from it.