David Sidoo’s companies failed to profit; but he made millions

Part 2: Often touted by himself and others as a successful businessman, a closer look at David Sidoo’s companies indicates otherwise

Glacier Media previously reported how Vancouver businessman and stock promoter David Sidoo asked a U.S. court for leniency in his prison sentencing for the fraud he committed. Central to Sidoo’s argument for a reduced jail term was the damage his crime has done to his reputation, which largely derives from his philanthropy — which in turn derives from the wealth he’s accumulated in the capital markets. On Thursday Sidoo began serving a three-month sentence in a Federal Bureau of Prisons facility.

The stock deal Vancouver businessman David Sidoo trumpets most in his biographical profiles is American Oil & Gas, which sold for $445 million US to NYSE-listed Hess Corp. in 2010 after striking oil in the Bakken shale play of the northern United States. But exactly what role he played is not clear.

Sidoo consistently refers to himself as a founding shareholder, or the founding shareholder, while on other occasions, such as at his July 15 sentencing, he claims to be have played a much more significant role: "I put a company together called American Oil & Gas,” he stated in a promotional interview by Metals News in June 5, 2017. “I put the board of directors together and the technical team together. We picked up very good assets that were strategic and were hot at that time.”

If Sidoo played such a prominent role in the company, then according to securities rules, he should have been publicly disclosed as a director or officer of the company.
However the company’s U.S. Securities and Exchange Commission filings make no mention of Sidoo as an officer, director, consultant, or greater than five-per-cent shareholder, which is the threshold for reporting purposes.

He is only mentioned in SEC filings on two occasions for relatively minor roles: In 2003 as an agent for share offerings, and in a March, 2006 prospectus as a selling shareholder of 22,500 shares at $7.40 US each, via his private company Siden Investments Ltd.

Sidoo was asked to clarify his claims as a founder, which are at odds with the public record, however he did not respond to questions via his U.S. attorneys David Chesnoff and Martin Weinberg. American Oil & Gas’ president at the time, Andrew Calerich, also did not respond to Glacier Media.

In any event, even a relatively small, low-risk investment at the outset of the company’s development — in 2002, when it was a Thai-based shell named Dr.GoodTeeth.com — could have provided Sidoo with the opportunity to make a lot of money.

Vancouver promoter Robert Gelfand, who had made a business of putting together shell companies, structured Dr.GoodTeeth.com, which began with 36 undisclosed investors purchasing two million five-cent shares for $100,000 when it registered with the SEC in September 2000.

Unlike most shells this one eventually succeeded by creating wealth for long-term investors. In January 2003, the company raised more funds and agreed to pay two US companies, Tower Columbia Corp and North Finn LLC, about $815,000 for a half interest in certain oil and gas leases. In February 2003, the board was augmented to include Calgary oil and gas businessman Moni Minhas, who is Sidoo’s cousin, and two representatives from Finn and Tower. The stock was then split on the basis of 8.25 new shares for one old share, which meant the 36 original shareholders now had 16.5 million shares.

It is not known when and at what price the original 36 shareholders sold their
shares. At the Hess merger price of $7.30, their $100,000 investment was worth $120 million. Although it’s unlikely they held their shares that long, if Sidoo was a founding shareholder – as he claims to be – then this is a likely source of much of his wealth.

Sidoo’s first stock promotion was East West Petroleum

Following his university and professional football career, Sidoo first worked as a broker, until 1999, then as a private investor and finally a director of several junior public companies.

Sidoo’s first undertaking promoting a public company as a director was with East West Petroleum, an oil and gas exploration company, and came shortly after American Oil and Gas was sold.

Sidoo joined the company in July 2010 and promoted investments by the company in California, Romania, Egypt, India, New Zealand and Morocco that eventually failed.

The venture has been a failure for its long-term, retail investors. At the time of Sidoo’s March 2019 indictment, one share was trading for seven cents.

However, East West could have been a windfall for brokers Sidoo worked with and early investors who were provided the opportunity to buy cheap shares before Sidoo’s business associates heavily promoted the company with intensive advertising, or what the trading world calls an “investor relations” program.

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East West

The company started as a TSXV-listed shell company called Avere Energy Corp. On Dec. 7, 2009, Sidoo’s business associate Nick Demare, a Vancouver chartered professional accountant who served on the board of American Oil and Gas, joined Avere.

Several days later the company issued 15 million units for $750,000 in a private sale of shares to 46 investors.

There was little risk to these early, private investors. Each unit consisted of one five-cent share plus one warrant to have the right to buy an additional 10-cent share by Dec. 21, 2010. Larry Aligizakis, a once suspended registered broker with Canaccord Capital acted as an agent, earning 1.5 million five-cent shares, valued at $75,000.

So, who acquired all this cheap stock?

Companies that issue private shares are required to disclose the identities of these private placement investors on forms filed with the securities commission. Full disclosure was previously public to assist investors, however the commission no longer does so in the name of personal privacy. The TSX-V does, however, on a discretionary basis, require issuing companies to disclose the identities of insiders and brokers who buy stock (commonly referred to as “pros”).

For example, the “pros” in this transaction included six brokers from Canaccord and Haywood Securities, who bought 2.2 million units, plus three major accredited investors in the energy start-up sector picked up 5.6 million units.

Among them was Haywood Securities broker Grant Caudwell, who wrote to the U.S. court in July asking for leniency in Sidoo’s sentencing. When asked by Glacier Media what public companies Sidoo has promoted/directed that have been successful, Caudwell said it wouldn’t be appropriate for him to judge since there are different definitions of success based on when an investor buys and sells stock. He said the best way to deduce this would be for someone to look at the stock charts.

In September 2010, Sidoo had his company looked once more to B.C.’s brokerage community for his first — and the company’s second — major private sale of shares: a $3.4 million deal for 13.6 million units, each consisting of one 25-cent share and one warrant to buy another share for 34 cents any time within the next three years.

Once again, local stockbrokers were heavy purchasers, TSXV disclosures show.

These brokers now had a vested interest in seeing the stock rise. At the same time, their job, and that of their firms, was to recommend and sell securities to clients under standards of investment suitability.

Brokers are self-regulated by the Investment Industry Regulatory Organization of Canada. It remains up to brokers to determine what is reasonable for disclosure to retail investors of a potential conflict of interest. Furthermore there is no requirement for brokers to disclose the price in which they bought into a company.

It is legal for brokers to buy such private sales of shares and there is no suggestion of securities violations.

John Woods, editor of Canada Stockwatch, a Vancouver-based stock market information service, and long-time Howe Street observer, said in an interview that while most exploration ventures fail, the deck is stacked in favour of those who buy in early, regardless of the final outcome.

“That’s the whole idea. You buy low and you sell high,” he said. “A lot of the investors are experienced. They know if you buy at five cents and it goes to 50 cents you want to sell it.

“It’s why a lot of people become brokers,” said Woods.

Sidoo, now 61, joined East West’s board with former federal Liberal cabinet minister Herb Dhaliwal, at the same time UBC geology professor Dr. Marc Bustin joined the advisory board.

Bustin, a distinguished expert in assessing coalbed methane fields, served as a director at American Oil & Gas until leaving in 2003, around the time Demare joined. Bustin later joined sponsored newsletter writer Doug Casey, a prolific promoter of Vancouver based junior stocks, as the “chief investment officer” for the Casey Research energy division.

Casey Research described Bustin and senior energy editor Marin Katusa as “the doctor and the dealman” in a June 2010 article. “Individually, the Doctor, Dr. Marc Bustin, and the Dealman, Marin Katusa, are powerful resources when it comes to separating facts from fiction about today’s energy scene and where the real opportunities for investors are to be found,” the article stated. While Bustin left Casey Research before eventually joining East West as its senior technical advisor — a role he had until November 2016 — Katusa, also Caudwell and Sidoo’s friend, would soon play a major role in East West’s promotion.

September’s sale of shares happened to be brokered by three private parties, including Vancouver-based KBH Capital Corp. KBH is owned by Katusa, Bustin and another colleague at Casey Research, Joe Hung. East West paid KBH $115,000 cash and warrants entitling them to buy up to 460,000 shares at 25 cents any time within the next three years.

At this point, tens of millions of cheap shares had been placed with undisclosed private investors, brokers whose role would be to sell shares at much higher prices and stock touts who would hype the stock in ensuing months. If the stock price jumped, significant profits were possible.

Starting in October, 2010 Katusa publicized East West, which to this point only had the one property in Alberta, which only served as a qualifying transaction for the TSXV.

“I haven't been as excited about a company as I am about East West…” Katusa wrote in The Energy Report, a widely distributed newsletter, which did disclose his East West holdings but not the price for which he obtained them.

As Casey made buy recommendations for East West, the stock reached its all-time high of $1.72 on Dec. 12, 2010, providing the early investors with the opportunity to sell their shares on the exchanges to retail investors for significant profits.

For instance, a $75,000 investment, such as that of Aligizakis, would have turned into $2.25 million if all 1.5 million five-cent shares were sold on the exchanges at just $1.50.

Now, the early investors’ 10-cent warrants from December 2009 became even more valuable. With the company’s promotion in full swing, audited statements show those early investors exercised 14.6 million of the 15 million warrants, just before they expired Dec. 21, 2010.

The next day — on Dec. 22, 2010 — Sidoo announced the company had arranged a $30 million deal to sell 27.3 million units at $1.10 each, in another private sale of shares. Each unit consisted of one share and half a warrant. One full warrant entitled the holder to buy another share for $1.75 within the next two years. Five investors from the Cayman Islands bought $8.8 million worth of shares.

GMP Securities and Haywood Securities (whose employees previously acquired much cheaper stock) brokered the deal. East West paid the brokerage firms a total of $1.7 million cash plus warrants to buy 784,095 shares at $1.75. This time, with the stock now selling at much higher prices, no insiders or “pros” bought any new shares.

On March 3, 2011, GMP Securities, now loaded up with $1.75 warrants, issued a lengthy newsletter to investors about East West, suggesting the then $1.04 stock would rise to $1.80 based on its publicized plays in Egypt and Romania — which eventually went nowhere.

By April 2011 East West stock had declined to 82 cents per share.

Those early investors, however, were still very much in the money as hundreds of thousands of shares, sometimes over one million, traded each day in the months following the public relations campaign led by Casey Research.

Conversely, retail investors buying shares from the early investors witnessed a steady decline in stock price. (On April 2, 2011, the price dipped below $1, never to return.)

“When you look back on these things, it’s easy to see where you’ve gone wrong, by buying the stock and listening to these people,” said Woods speaking in general terms. “However, at the time everything looks rosy and not buying the stock would not make much sense because things look so good.”

Sidoo took over as president and CEO of East West in October 2013 and over five years, collected $1.1 million in salary, plus 3.2 million shares which he has never sold, according to insider disclosure reports.

The revenues the company did realize were a result of a TAG Oil partnership, in which East West bought existing assets. In 2015 when net revenue from the New Zealand properties peaked at $4.2 million, Sidoo was compensated $379,653 in salary. The company still lost $6.6 million total that year, audited records show.

On Dec. 30, 2016, Sidoo appointed son Dylan to the board. Dylan had just graduated from the University of California’s school of cinematic arts and at the time, according to a company statement, and was also working with his founding film acquisition and distribution company Stryker Entertainment Inc. Over his college summers he was an intern at Haywood Securities and Lionsgate Entertainment, which was founded by financier Frank Giustra.

East West lost most of the $33.4 million it raised. Prior to his March, 2019 arrest, Sidoo had been considering using the company’s last $4 million cash to buy California cannabis company Juva Life Inc., per company disclosures.

The plan was set for a vote in April, 2019. However, Sidoo took a leave of absence on March 14, 2019 following the allegations on the college entrance, leaving Demare as interim CEO and president. That April Dylan resigned and shareholders rejected the acquisition.

Sidoo permanently departed East West last December and the stock sits at five cents.

 

Sidoo-UBC
As David Sidoo promoted a handful of public companies between 2010 and 2019, he was also active in philanthropy and courted politicians to attend his social events, such as his numerous presentations of the Vanier Cup as a Thunderbirds alumnus. Here, in June 1016, he presented the Cup to premier Christy Clark, who’s party also accepted $166,000 in donations from him. - University of British Columbia



Sidoo set eyes on lithium boom for his second biggest promotion

Sidoo’s next promotion, and most significant after East West, was Advantage Lithium, which was born of a shell company called Valor Ventures, via a reverse merger. Similar to East West, early investors had the best opportunity to profit while there were fewer, if any, such chances for regular investors who purchased shares on the open market.

Sidoo became director of Valor on April 9, 2015, two days after a $1.1 million private sale of five-cent shares overseen by Demare, Valor’s corporate secretary. Former Liberal Member of Parliament Herb Dhaliwal also joined the board and bought 500,000 shares for $25,000 through his private Richmond-based investment company ADH Holdings Ltd. Also buying in was San Diego stock tout Jeff Phillips, who bought two million shares for $100,000 for the Jeff and Kimberly Phillips Living Trust, according to disclosure forms filed with the B.C. Securities Commission.

AdvantageSidoo became president and CEO on May 18, 2016, two months before rebranding to Advantage Lithium (he initially renamed it North South Petroleum). That August Sidoo raised $4 million by issuing 16 million 25-cent units (plus 25-cent warrants) to investors. Brokers bought two million units, however the TSXV didn’t disclose their names.

 

In October, 2016, Sidoo closed another private sale, for $5.1 million by issuing 8.5 million 60-cent units (including 75-cent warrants). No brokers bought these units.

Sidoo set course on a significant promotional campaign beginning in the last half of 2016. In the year ending July 31, 2017 the company spent $2.2 million on advertising and public relations, audited records show. “We have a clear goal to build shareholder value through strategic acquisitions and the drill bit,” stated Sidoo in a September 2016 news release. Numerous news releases touted the exploration of five sites in Nevada and one in Mexico, which Sidoo said were “drill ready.”

Despite no revenue, the stock rose to $1.30 per share by late November 2016, providing those early investors with an opportune time to sell shares into the open market, following a standard four-month hold period.

Sidoo was featured in a March 2017 National Post story on the hot commodity tied to the electric vehicle boom. "There's a lot of junior companies that are starting to pop up and say, 'We're going to produce lithium, we're going to be in the market,'" he said. "I don't see those companies actually doing anything but promoting their stocks."

However, in late 2017 Sidoo abandoned the company’s interests in six properties, for close to a $5 million loss, company filings show.

Sidoo pushed the reset button with a new venture in Argentina, which became the basis of the promotion. The company bought shares in six Argentinian properties owned by Orocobre Limited, an Australian lithium exploration company, by issuing Orocobre about one-third of the company’s shares.

To fund exploration and company costs, Sidoo raised $20 million by selling 75-cent shares in March, 2017, via private placement.

While Advantage stock dipped to 38 cents per share in June 2017, much publicity of drilling coincided with a spike back to over a dollar per share come October 2017. In the year ending July 31, 2018 the company had spent $2.1 million on advertising and public relations, according to audited records. By this time Dylan was conducting investor relations for the company, according to his LinkedIn profile. Phillips, an early investor and president of financial services firm Global Market Development, also provided publicity for the company in a March 2018 Outsider Club piece, which disclosed him as a “large shareholder,” without mentioning his entry-level price.

In July 2018 Sidoo raised $12 million more by selling 15.6 million shares at 77 cents each, by private placement. One year later the stock had slipped to 38 cents per share.

Sidoo was well compensated for his role. In 2017 he took home $842,000 in salary and bonuses while in 2018 he received $300,000. In 2019, the company reported $453,578 worth of earnings for Sidoo.

After his arrest, Sidoo took a leave of absence from the company and on March 11, 2020, he resigned.

After Sidoo sold tens of millions of dollars worth of stock at between 60 cents and 77 cents, the company, having never realized any revenue, was bought out entirely by Orocobre on April 17.

Orocobre valued each Advantage Lithium shares at 28 cents.

Sidoo has resigned from five other promotions

Aside from East West and Advantage, Sidoo has also directed five much smaller public companies.

He became president and CEO of the shell company Seaway Energy Services Inc. on Oct. 19 2016. Sidoo added Dylan to the board as well as Amrik Virk, former B.C. Minister of Advanced Education, who had appointed Sidoo to the UBC Board of Governors in 2014. Then, Virk was an RCMP officer turned cabinet minister who knowingly oversaw executive compensation and disclosure violations at Kwantlen Polytechnic University. Virk was shuffled from cabinet but kept his MLA post.

Seaway was an inactive environmental consulting firm to the petroleum and natural gas industry. The company saw relatively minor investments poured into it during Sidoo’s tenure.

As a director Dylan intended to steer $3 million raised from investors (buying 20-cent shares on Dec. 12, 2017) into the entertainment, blockchain and cryptocurrency sectors, according to news releases.

The company spent $1.9 million of that investment in 2018 and 2019, including paying its executives just over $557,000 and $346,602 on travel expenses. Sidoo was paid $177,000 in 2018, including an $80,000 bonus.

Seaway subsequently became Sidoo’s second attempt at a cannabis venture after the February, 2019 announcement of a planned reverse takeover with Oregon cannabis company Sweet Earth Holdings.

This year, following the resignation of Sidoo, the company relisted as Sweet Earth on the Canadian Securities Exchange where nascent weed stock tends to be planted. The stock rests at 16 cents per share and the company’s yet to realize any revenue.

Amrik Virk
Former minister of advanced education Amrik Virk signed off on David Sidoo’s appointment to the Order of B.C. In 2016. After he was removed from cabinet and defeated in the 2017 election, Virk joined two Sidoo-led companies. - Files

American Helium

Sidoo’s next promotion after Seaway was helium exploration company Bruin Point Energy Ltd., which he joined in December 2017 as chairman of the board. The company was quick to lose money on its initial investment.

Sidoo raised $3.2 million in late 2017, however for the year ending June 30, 2018, the company recorded a $3.1 million loss.

Sidoo changed the company’s name to American Helium on May 18, 2018, amid news of global helium shortages. However it didn’t take long for the company to announce it had “reassessed its continued involvement in the helium energy sector and determined to exit the industry,” citing a lack of capital on Sept. 30, 2018.

A large chunk of those investor dollars ($824,368) were used for public relations while operating expenses, such as “corporate development, legal and professional fees,” for the year ended June 30, 2018 totalled about $650,000. Executive compensation totalled about $190,000 in salary plus about $470,000 in share-based compensation. The company stated in its 2018 annual audited statement that it would write off all exploration and evaluation costs, which totalled about $720,000 as of June 30, 2018.

Sidoo resigned as director and chairman after his arrest in March, 2019.

Dylan launches gold exploration with former B.C. cabinet minister

In December 2017 Sidoo assisted Dylan in launching shell company Meridius Resources Ltd. with a $650,000 initial public offering of 6.5 million 10-cent shares. An additional five million shares were issued to board members as compensation, mostly to the Sidoos.

Company executives were paid a combined $137,080 in 2018. Virk joined the board in April to “augment the company's resources in evaluating an emerging industry transaction.”

The company has been relatively inactive. Dylan, the CEO and president, began a drilling program for gold on a property near Duplessis, Quebec, as of May 2018. Sidoo’s younger son Jordan joined the board last August. Disappointingly, the brothers found no gold or silver in Quebec and the company terminated the venture in November, 2018.

Sidoo left the Meridius board following his arrest and Virk has assumed the role of CEO. Last month Virk announced a name change to BMEX Gold Inc.

Sidoo partners with Aquilini’s Vancouver Canucks

With mass public shootings increasing annually in the U.S., Sidoo most recently was banking on promoting a concealed weapons detection system with Liberty Defense Holdings Ltd. until his departure from the company a day after his March 12, 2019 arrest.

Sidoo founded Liberty in 2018 and took it public with a reverse takeover of shell company Gulfstream Acquisition 1 Corp. Before the takeover Liberty issued 21.25 million five-cent shares, for nearly $1.1 million. Investors cashed in all of their five cent warrants by Dec. 31, 2018, meaning the company tallied 42.5 million five-cent shares right off the get go of the promotion.

Sidoo subsequently issued 8.8 million more shares at 80 cents per share for $7 million. Trading opened to regular retail investors on the TSXV on April 9 at 80 cents per share.

The company has licensing rights to a 3D imaging system called Hexwave from the Massachusetts Institute of Technology. The goal was to target public venues, such as stadiums, malls, transportation hubs, high-end hotels, banks, schools and outdoor events. In April, 2019, Liberty made a big splash in mainstream media, particularly in Vancouver, when Liberty advisor and shareholder Francesco Aquilini, owner of the Vancouver Canucks, announced the scanning system would be deployed this year at his stadium Rogers Arena. A June 13, 2019 promotional piece suggests Hexwave is an alternative solution to “thoughts and prayers” to curb mass shootings. However, Rogers Arena did not end up deploying the system last season.

In 2018 Sidoo was paid $146,318 by the company, which incurred losses of $11.6 million in 2019, including a $200,000 severance payment to Sidoo.

The stock sits at 4.5 cents per share with the company looking at a new reverse takeover.

Another pot venture

Two days after resigning from Liberty, Sidoo also resigned as a director of National Green Biomed Ltd., a start-up medical marijuana firm, whose board includes Sidoo colleagues Demare and Dhaliwal. National Green Biomed Ltd. donated $1 million to UBC in June 2015, for research. The company filed a preliminary prospectus last January and is raising money to produce licensed medical cannabis in the Vancouver suburb of Mission.

gwood@glaciermedia.ca
 

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