Only in the mad, mad, mad world of Canadian public markets can investors with diarrhea end up with natural gas.

As a biotech company with gas pains, Synsorb Biotech sent itself and its anti-diarrhea drug down the toilet, leaving shareholders flushed with embarrassment.

As a biotech company with gas, Synsorb has become one of the hottest stock plays seen in these parts in some time.

But investors ought to take a reality check on this one, give their heads a shake and consider the fire they’re playing with. Thus far, Calgary-based Synsorb (SYB-TSX) is being fuelled by hot air, not gas. And the only gushing is coming from the wild speculators on the investment chatboards.

It’s a pure, pure spec play. If you want a good time, you might try Las Vegas. At least there, you get to blow your stash with a complimentary Jack Daniels chaser.

The euphoria over Synsorb’s plan to turn itself into an oil and gas company with superstar oilman David Tuer at the helm is proof that investors haven’t learned much from the bursting of the dot-com bubble almost three years ago. And it may also be a red flag that oil and gas stocks are getting a little on the frothy side.

In 1999, the hot trend was for comatose gold companies to leap on the tech bandwagon, announcing that they were transforming themselves into dot-coms. Cheap news releases sent their stocks rocketing into cyberspace.

I recall a TSX-listed gold company, Sikaman Gold, announcing a 3-D Internet mall that sent its share price to ridiculous levels. The party was short-lived. The stock has been halted for about two years while gold stocks, ironically, have been flying. As usual, investors were left holding the bag.

Now, based on the euphoria over Synsorb and with high natural gas and oil prices, you can expect more down-and-out companies to copy Synsorb, announcing their intentions to become oil and gas companies (some other tech companies have already jumped on the oil and gas bandwagon).

Unfortunately, there aren’t that many David Tuer clones out there and, if you’re playing this game, you’d better showcase a name CEO.

Two trading days after Synsorb announced its plans to become an energy producer focused on natural gas, the stock more than tripled, soaring 247.1 per cent on 3.2 million shares. It ended the week with a quadruple gain, closing Jan. 10 at $2.98.

The gas-fired news lit up the Synsorb chatboards online with even more hype than when the company was touting clinical trials for drugs to treat e-coli and diarrhea. Synsorb stock imploded 13 months ago when the company halted development of its anti-diarrhea drug, Synsorb Cd.

Punters on the chatboards were proclaiming Synsorb as ‘PanCanadian II’ in reference to the company Tuer piloted for six years, driving revenue from $5.5 billion to $10 billion before his unexplained resignation for “personal reasons.” Soon after Tuer’s departure, PanCanadian merged with Alberta Energy Company to form EnCana.

Someone calling himself ‘Stockaholic’ wrote on the Stockhouse chatboard: “I’m on the sideline on this one but if it goes over $3 it’s not coming back and get the oxygen masks ready because it’ll be heading for the nosebleed section.”

Even Jim Silye, who was appointed Synsorb’s CEO in a shareholder revolt last spring, helped fuel the speculation by telling the National Post that “you can dream all you want now . . . you don’t know how big this company is going to get.”

But Calgary energy guru Peter Linder tugged on the reins with a sobering view of Synsorb mania.

“To me, it’s overdone,” piped the energy strategist for DeltaOne Capital Partners, quickly noting that he wasn’t a buyer of the stock. “They (investors) are putting too much value in Mr. Tuer and his team. It deserves a premium, but it’s gone too far. There isn’t much to this company at this point. I think he has a reasonable chance of (success), but it’s not that easy (building a company from the ground up through acquisitions). It’s a seller’s market and you have to compete with everyone else.”

If the deal is approved by shareholders, the company plans to issue $3.5 million worth of secured debentures and 5.5 million common-share purchase warrants, while the group led by Tuer would contribute $3.5 million in cash to hold a 45-per-cent share in the company. The company also has $90 million in tax pools, drug patents that it hopes to sell, and a manufacturing plant and lab equipment that may be worth about $6 million.

For long-suffering Synsorb shareholders who didn’t average down recently when the stock was trading in the $1 range, the lights have already been turned out at that party.

At its peak in February of 2000, Synsorb traded as high as $22. It has since consolidated the shares on an 8-to-1 basis, meaning that if you paid $20 for your shares and are still holding, you’d break even when the new gas-fired entity hit $160 a share.

Of course, even if Tuer is able to work some magic with Synsorb, don’t bet on the stock getting past $10 before being swallowed up by a senior company like, say, EnCana, the company Tuer helped build.

* STREET TALK: Here’s what Synsorb CEO David Cox told Business Edge in July of 2000, five months before the company pulled the plug on its trials.

“If you want to invest in biotech, buy and expect to hold for four years,” said Cox, (recently appointed as CEO of Edmonton-based pharmaceutical manufacturer KS Avicenna).

“Biotech stocks have been characterized as having a lot of speculators in them, but they should not. It’s a stock for investors – patient investors.”

* SAGE WORDS: “There are a lot of brick walls, and I think success is determined by how many of those bricks you can tear down.”

– John Forzani, Forzani Group’s departing CEO (in an interview with the Edge two years ago).



HOT ALBERTA STOCK: Synsorb Biotech
SYB-TSX $2.98
Up $2.25 cents (+308.2%) on 4,651,956 shares
(for week ending Jan. 10).
Synsorb may not own a quart of oil or a can of gas but it does have David Tuer. And that’s all that mattered to investors who gave the stock a mighty pop in a four-day trading frenzy that quadrupled the stock price on news of the former biotech company’s plan to become an oil and gas producer. Tuer, the former PanCanadian CEO, already has his work cut out based on the stock’s reaction. The share price did, however, sputter in a couple of attempts to hold over the $3 mark, peaking
at $3.29.



COLD ALBERTA STOCK: Mainstreet Equity
MEQ-TSX $3.10
Down 87 cents (-21.9%) on 15,000 shares (for week ending Jan. 10).
No surprise here as investors took some profits after Mainstreet nearly doubled in December, peaking at $4.48. The Calgary multi-family residential real estate company tends to make violent swings on light volume and ended the week with a cavernous bid/ask spread of 3.15/3.42.