07.15.09
Maxlife Fund Corp: I was right (of course)
It is always fun to observe the actions that executives of listed shell corporations (excuse me, I mean development-stage companies) will engage in as they try to pretend that they run real companies. They will put out press releases about the most mundane and inconsequential things; they will project absurd revenues when they do not even have the money to develop let alone manufacture products.
One of my favorite whipping boys (although in its defense it is not nearly as bad as many OTC BB listed companies) in this respect has of course been the amazingly overvalued Maxlife Fund Corp (OTC BB: MXFD). When the company in early 2008 formed a joint venture with a private California insurer (Capital Growth Planning Inc. or CGP), it said in an 8k filing: “The goal of the Joint Venture is to develop life settlement policy transactions exceeding $1 billion in total face value through the remainder of 2008, using several of CGP’s specialized life settlement products and strategies.”
I was of course dubious, writing, “I believe it unlikely that the companies’ joint venture will transact $10 million (face value) in life settlements this year, let alone $1 billion in face value of life settlements.” My blog post attracted the ire of Douglas Miller, CEO of CGP, who wrote a not very nice comment on my blog post, mostly focusing on a few misstatements I made regarding his company (that I immediately corrected). Oddly enough, he had little to say about the main point of the post, which was my belief that the joint venture was unlikely to ever lead to material revenues for Maxlife.
Of course, my main point was correct. Maxlife and CGP just formally dissolved their joint venture and as of Maxlife’s most recent 10Q the joint venture had apparently produced $0 in profits. So while Mr. Miller was correct to point out to me that “your right to free speech is not unfettered and it does not give you the right to make disparaging false statements and misrepresentations in a commercial/business context,” I remind him and all my readers that truth is an absolute defense against defamation; in other words, I have an unfettered right to make disparaging true statements and make known my negative opinions about Maxlife or any company.
Now that all is said and done I do have a question for Maxlife Fund Corp: how was it that an outsider such as myself accurately predicted the outcome of the joint venture while Maxlife Fund Corp’s prediction was so incredibly wrong?
Disclosure: I have no position (long or short) in MXFD (or CGP for that matter). I confess to a visceral hatred of everyone who has ever come into contact with the company except for Victor DeLaet (remember him?). I have a disclosure policy.
Daniel M. Ryan said,
July 15, 2009 at 10:52 pm
In a way, you’re lucky. In my own country of Canada, people of Mr. Miller’s ilk file defamation lawsuits. Believe it or not, the defense of fair comment doesn’t always work.
Great Dane said,
July 16, 2009 at 5:39 am
But the stock has almost never been, and remains, unborrowable. I wish there were a rule that options market makers were required to write puts on all publicly traded stocks, including OTC.
Michael Goode said,
July 16, 2009 at 6:05 am
Daniel – that is why I do not live in Canada. Of course the reason for that is that Canada took its defamation laws most directly from the UK, which has the most oppressive defamation laws in the world. While the US may not have the best health care system in the world we do have the best defenses for freedom of speech.
Michael Goode said,
July 16, 2009 at 6:06 am
I should also add that the anti-SLAPP laws in some states make for even stronger defenses against such defamation lawsuits. As an example, Andrew Left of Citron research has used that law (he lives in California, which has the strongest anti-SLAPP law) to beat a couple of lawsuits before they even went to trial.
Michael Goode said,
July 16, 2009 at 6:10 am
http://en.wikipedia.org/wiki/Strategic_lawsuit_against_public_participation
Hmm, evidently Canada has something similar.
Michael Goode said,
July 17, 2009 at 8:21 am
Update: Maxlife lost $1250 or 100% of their investment in the Maxlife-CGP joint venture. Info from today’s 10Q filing
http://www.sec.gov/Archives/edgar/data/1379377/000121390009001766/f10q0509_maxlife.htm
bluecollartrader said,
July 22, 2009 at 6:20 pm
Love the blog, Michael. Good for you for brushing the flowers aside to see what’s really there; dirt and manure! As an aside, our healthcare here in the states isn’t too bad. The problem is the lack of free-market choice by the folks who are actually getting the service. If one were atually handling the bill paying instead of some bureaucrat in an insurance company cubicle, there would be fewer $20 aspirins and $250 hospital visits for “sniffles.” The laws of supply and demand and of free markets are beautiful because they work!
Michael Goode said,
July 22, 2009 at 7:09 pm
bluecollartrader — thanks for the comment. I agree that more direct payment of costs would be good. There is plenty else wrong with the US system, however (and I don’t mean the fact that it isn’t government-run); I think this article in the New Yorker deals with many of the problems well:
http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande
Simply put, we pay more money as a country than any other and we get worse health outcomes. Obama’s health care bill would not address the root causes of that.
daniel kahan said,
August 9, 2009 at 9:29 am
Michael, as a former director of MaxLife who was NOT involved in the JV I think there was the POTENTIAL when the deal was announced over ONE YEAR year ago to move this forward and possibly produce the results in the press release. The world was a very different place then and it would be interesting if you were compare this press release with those of GM and Lehman at that time. As an actuary I strongly believe Life Settlements are a sound and safe LONG-TERM investment provided they are based on accurate (or conservative) INDEPENDENT life expectancies and aggregated into a portfolio.
daniel kahan said,
August 9, 2009 at 9:39 am
Michael, I assume you may be on vacation as I haven’t seen you comment yet on the Aug. 5 MXFD press release regarding the cancellation of almost 50% of the 30 m. shares by its founders. It’s a very interesting move and I am very surprised that the market hasn’t reacted to it. They also announced the introduction of an MX Trust Series, which is very similar to what Life Partners offers private investors and has the POTENTIAL to generate a significant revenue stream if properly marketed.
I look forward to your reply.
Michael Goode said,
August 10, 2009 at 3:32 pm
Daniel – Sorry I didn’t reply. Unfortunately my server has stopped sending me notifications when I have new comments. I have also drastically cut down on what I am writing for this blog and I don’t plan to write about Maxlife in the future (I am busy with other endeavors).
As to why the market hasn’t reacted to the share cancellation, I think the reason is obvious: there really is no market for MXFD shares, judging from the trading volume. Plus, even with 50% fewer shares, Maxlife has a >$100m market cap despite no revenues and less than $1m in book value. No matter how good the marketing, an insurance company (or investment bank, as MXFD would be more akin to if it sold on life settlements) needs significant capital. I find it hard to imagine Maxlife doing much of anything without raising a lot more capital.
Also, whether life settlements are in general good investments (they are) has no bearing on whether Maxlife is a viable company (as evidenced by a lack of capital and sales, it does not appear to be).
daniel kahan said,
August 23, 2009 at 6:34 pm
Michael, I just picked up your reply and am pleased to note that you agree life settlements are in general good investments.
If any of your readers are interested in this space, they are welcome to contact me at call1dk@aol.com .
Michael Goode said,
August 23, 2009 at 7:34 pm
I should of course qualify that statement: they can be good investments. The details of the settlement would determine whether an individual deal is good or bad.