Alphabet Soup
from
March/April 2002
by David Moon
Fine Italian dining, oil-pipeline surveillance, B2B services for
companies in various African nations, the sale of locomotives and
locomotive parts to the government of Pakistan, and an alleged cure for
anthrax have all been part of the business mix at 2DoTrade
Inc.—although that mix was recently interrupted by a two-week
suspension of trading in the company’s stock.
It was 2DoTrade’s announcement in November that it was about to begin production of a “new flagship product”—one that would eradicate and neutralize lethal bacteria, including anthrax—that caught the attention of Stephen Cutler, the SEC’s top enforcement cop. Promising that “we will be vigilant about routing out and prosecuting those who seek to exploit recent events to defraud investors,” Cutler froze trading in the company, which is registered in Nevada and headquartered in London.
If the past is anything to go by, 2DoTrade should have no problem finding another flagship product. The purported anthrax neutralizer was just one in a series. Moranzo, as the company was originally called, began in 1994 as little more than an idea, specifically to put together a global chain of full-service, white-tablecloth Italian restaurants. Not much happened for five years, but in its 2000 annual report the company was still envisioning the most upscale authentic Italian dining experience outside Italy. The first restaurant was set to open in San Diego in 2002.
Moranzo also had a backup plan. If the restaurant chain ended up in the minestrone, the report said that the company would grow by acquiring a “unique product or service.”
The restaurant chain never did get beyond the planning stage. Plan B turned out to be a June 2001 merger with 2DoTrade, a company that had been set up the previous year to provide market information about goods and services in Africa. The merged outfit not only took 2DoTrade’s name but adopted its core business too. It set up a website that it hoped would become a major business-to-business hub for companies wishing to trade with Africa. Before long, the website was announcing that 2DoTrade had sold African timber in China and was negotiating to sell 400 four-wheel-drive vehicles of unspecified origin to the Chinese.
In December the company went through another geographic expansion, announcing that it had played a middleman’s role in the sale of 35 Brazilian locomotives to the Pakistani government. Company president Barrington Ellis, a former commodities broker, said that the deal marked the first of many major transactions the company hoped to do outside Africa. 2DoTrade would now focus on “leading the way in facilitating export driven prosperity in emerging markets worldwide,” he declared in a press release.
The run-in with the SEC happened three months later, after the company’s announcement that it had acquired the marketing rights to “ATHOQ,” a purportedly nontoxic compound that it said was capable of killing all sorts of bacteria, including E. coli as well as anthrax. “We are pleased to play a part in the war on anthrax,” Ellis proclaimed in another press release. He said that “saving human lives should always rate higher than making profits,” but added that revenues from the drug would nevertheless be “substantial.” Investors took notice, and the stock, which trades over the counter, more than doubled, to 50 cents a share. The SEC moved in.
Trading resumed two weeks later. But the glow was gone and 2DoTrade’s share price fell 80%, to a recent 9 cents. The company hasn’t given up on its anthrax drug, however. It has provided the SEC with additional research data, and has also announced that further research is being done on the compound’s potential properties. The company website says that the board has pledged to “forge ahead with strength, purpose, and focus.”
But does 2DoTrade have a Plan C? So far, no word on that, and the company did not return phone calls requesting an interview.
David Moon is president of Moon Capital Management.
