In mid-December, the Securities and Exchange Commission (SEC) filed a motion against Alternative Energy Holdings, Inc. (AEHI). The motion alleged that the company was engaged in fraudulently raising funds for a $10 billion nuclear energy project. As part of the filing, trading in AEHI was halted for two weeks. At the time of the filing, AEHI was trading for 58 cents per share. When trading was restored on December 28, the market price had fallen to 8 cents per share, a drop of more than 85%.
On January 14, 2010, Don Gillispie, the founder and CEO of AEHI, filed papers with the SEC to respond to the allegations included in the complaint. You can find the filing at Nuclear Townhall at an article titled AEHI COUNTER-ATTACKS SEC FRAUD ALLEGATIONS.
This story is one that captures my personal interest for a variety of reasons. As some of you know, I am the founder of a tiny little company that once aimed high – we thought we had a shot at designing and building relatively small nuclear power plants. Along with various other participants over the years, I spent many hours over about a decade and a half talking to potential investors and sharing our story. Our efforts were not successful, but the experience gave me some understanding for the process of building something big after starting from little more than a good idea.
In my opinion, the ideas that AEHI has been promoting are good ones. They have been working to find an accommodating area with lots of land, decent water rights, and a knowledgable nuclear work force and to do the groundwork required to get permission to build a nuclear power facility on that site. Achieving that goal would fundamentally change the value of the land and attract additional capital.
In some ways, AEHI’s dream is the nuclear energy equivalent of building out the infrastructure for something as ambitious as searching the internet using left over computers and a college campus network. Most people would call such a dream impossible – except those guys named Sergi and Larry who actually accomplished the feat.
Who knows if the company will be successful, but the story was compelling enough for me to take a small portion of my savings and invest. One of the things that made the investment interesting for me was the fact that AEHI was not at all shy about telling the world how it was doing – the company issued several press releases each week. Not surprisingly, the company also attracted some highly motivated opposition. It was frequently attacked by both organized anti-nuclear groups and by admitted short sellers who were financially motivated to force the company’s stock to fall.
Even strong nuclear advocates implied that AEHI was engaging in an activity that was bound to fail; Dan Yurman, one of my good friends in the pro-nuclear blogging world, wrote a piece that applied former NRC Chairman Dale Klein’s warning that the nuclear industry was “no place for amateurs” to Gillispie and AEHI. Dan may well be right, and as a former Idaho resident he may have more personal insight than I, but it sure seems to me that the folks involved in AEHI are not amateurs and fully recognized that they were undertaking a difficult process.
Fortunately for me, less than 1 month BEFORE the SEC took their action to accuse the company founders of fraud because they had not yet succeeded in what they fully disclosed to all investors was a multi-year, phased program, my wife and I purchased a home. That event encouraged me to liquidate some stocks, including a significant portion of my AEHI holdings, so my financial hit from the government’s action was not as sharp as it could have been.
I can only imagine how AEHI’s employees and suppliers must feel – according to the filing that I just read, the company has been unable to pay any of its bills since December 14. In contrast, those short sellers are now wealthy; there is nothing quite as rewarding as selling short when the price of the stock that you shorted falls by 85% in a two week period.
My advice to you this morning is to take some time to go and read Don Gillispie’s sworn deposition telling his side of the story.
ABC News/Money (January 17, 2011) Nuke Company Execs Fights Back in Federal Court
KTVB.com (Idaho News & Weather) (January 15, 2011) Nuclear power company fights SEC fraud accusations (With embedded video)
Roanoke Times (January 16, 2011) Alternate Energy Holdings Inc. CEO prepares for court fight against SEC