“Is This Tiny Stock the Next Exxon — Or the Next Budweiser?”

By Travis Johnson, Stock Gumshoe, July 13, 2009

I hope that headline doesn’t get read as an either/or — because the third “or” should probably be “Or the next pink sheet stock whose certificates are fit only to line a birdcage.”

Not that this company doesn’t have something going for it, or the possibility of success someday — just wanted to make sure it’s clear that despite the breathless teaser text from StreetAuthority, there’s always every chance that one of these tiny stocks will disappear without a trace.

Not so today — today, thanks no doubt to the fact that thousands of folks read this teaser ad over the weekend and got excited, the stock jumped by almost 100% as the market opened … it has come down since, but is still up about 30% as I type this. And may be up again as the mighty hordes of Gumshoedom learn the name of the stock, one can never tell.

So what is it?

First, let’s look at the ad — patience, dear readers …

“Is This Tiny Stock the Next Exxon — Or the Next Budweiser? (A Big Biotech Firm Just Paid $10 Million to Find Out)

“This investment could make anyone who listens filthy rich.

“The company owns a unique living compound with huge potential in the production of cellulosic ethanol — a market with +15,900% government-mandated growth ahead.

“But even that immense market isn’t big enough for its CEO. He’s looking at more than a hundred uses for his patented “C-1 fungus biofactory.” C-1 gives him a serious competitive advantage: a patented living organism that no one else can duplicate.

“It can help thousands of companies make better bread, better beer, better cosmetics, better drugs, and better gasoline… and only this company has it. He’s already licensed this game-changing technology to two major energy producers. Biochemical firm Codexis just paid $10 million to ‘borrow’ this miracle compound.”

And that’s just the intro from the publisher — the newsletter is Andy Obermueller’s Government Driven Investing, which recently launched and has so far focused (in its ads, at least) on ethanol, particularly the cellulosic variety (you know, the kind that hopefully doesn’t require us to starve people to grow fuel). I wrote about the first teaser pick of his a few weeks back, you can read about it and the government connection that will require huge ethanol growth here.

But today we’ve got a new pick in a related business — this one starts with a fun story about a wrestler and a scientist, and a “fungus that could replace oil forever” … he tells us about the CEO of this firm, who started out working to stonewash jeans with pumice, and after a company started doing it cheaper using enzymes he looked to some Russian scientists to help him develop enzymes of his own.

That enzyme business apparently appealed to him, so they continued to build it and developed what Obermueller calls C-1 Fungus, which is a variety of that fungus that broke down blue jeans, apparently a variety that was a happy mutation but is much more powerful. Here’s what Obermueller says about it:

“The C-1 platform can be used for hundreds of applications beyond cellulosic ethanol. The markets are endless.

“While the +15,900% government-mandated growth in cellulosic ethanol offers dramatic potential, C-1 is as useful as steel, as adaptable as silicone and as plentiful as hydrogen.

“The fungus can produce enzymes for making bread rise in baking, or making a key part of a life-saving drug.

“It can improve so many processes that someday you might go to the gas station and see “C-1 Inside” on the pump. You might go to the drug store and see “C-1 Inside” on the boxes of pills. Someday you might put on a pair of blue jeans and realize they’ve got “C-1 Inside.” You might buy a loaf of bread or a bottle of beer and see “C-1 Inside.” It goes on and on and on.

“Thousands of companies would pay for the right to integrate C-1 into their manufacturing. And no one could copy it.

“While the +15,900% government-mandated growth in cellulosic ethanol offers dramatic potential, “C-1” can be used for hundreds of additional applications.

“Even with unlimited cash, it could take another research team 10 years to catch up with C-1. And they still might fail. Remember, this company’s breakthrough was a “serendipitous mutation” — a happy win against long odds. That’s one heck of a competitive advantage.”

So what is it, really?

Well, the CEO and founder really is an Iowa grad, his name is Mark Emalfarb, and his company is called …

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Dyadic International (DYAI on the pink sheets, it was delisted from the American Stock Exchange over a year ago — shares are quite volatile and are probably now being driven by Obermueller’s attention, and perhaps by the mention in this space, so be careful.)

The company is real, though it’s a tiny one and it has had run-ins with partners over patents, and with the SEC in recent years, as well as a battle for leadership that had the CEO ousted and then suing to return and take over the company. I don’t know much about the nature of the complaints or the disputes, but the company’s announcements seem to indicate that they’re all settled now.

And the company seems largely built around this one fungus — here’s how they describe it:

“Dyadic’s patented Chrysosporium lucknowense eukaryotic host production organism. This fungal organism was isolated by Dyadic scientists from alkaline soil in Eastern Russia. The wild C1 organism was evolved to generate a hyper-producing organism useful for discovery, screening, and overexpression of genes and production of their corresponding proteins.