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OTC funding deals

Most all OTC funding deals include share transfers to the VC with warrants. NO A/S no warrants. The picture is clearing. Now we have huge money being traded, as retail loses interest. I may be crazy, but my tin foil hat just let my spiderman spidey sense alarm go off.

Yes I like that this news came out. It means VCs should become involved with the company soon. That's the one reason to trade OTC stocks. When the OTC game is played out!

That last sentence is saying that the CEO is confirming he is in funding talks with a venture capital firm (VC), without saying it. And when VCs are involved with a pennyland stock, you can bet they will be selling them for a profit ASAP.

That's why they fund a startup in the first place. Successful startups are rare and VCs know it. They want their profits up front. And expect the actual loan will not be paid in the long run. If it is, that's cream, along with the warrants they can exercise, being cream.

All VC funding requires common shares, to do the deal, on top of the loan agreement. Most all require warrants to be issued along with the shares.

If the company has to give all their tresuary shares to secure the loan, they need to register a larger A/S, so if they do become successful and the VC wants to exercise his warrants, it's all legal.

So buy the CEO confirming an increase in A/S was needed, he confirmed a VC wanted it to fund them.

Warrants state the holder has the right to purchase stock at a future dat,e at a deep discount price. It's icing on the cake to get the loan the company wants.

VCs are the greediest of all lenders. They want their cake and icing too. If by chance the company does succeed, they will exercise the warrants, basically forcing new funding cash on the company. Usually when it's not needed. Usually the warrant discounts are very large, so the VC automatically gets a large ROI for just buying stock. This also diludes the stock.

So here's how it works.

The stock is worth .005 and the loan is valued at say $250k. The company will issue shares valued at $250k (that's 50 million shares) with warrants for say 10 million with at strick price of 1 cent each, with a 1 year exercise date. They can trade them in for a year. If the company succeeds odds are the stock will have a much larger value then 1 cent. Built in ROI !

If the company doesn't have enough shares in the tresuary to back the warrants, they need to up the A/S to cover any possibly of exercise a years from now. To get their cash out of the deal the VC need to sell the common shares ASAP.

Here's where the darkside comes in. The insiders need to prove to the VCs, they will be able to sell that many share for a profit. This is where you see volume & price pops, before any large run. That pop tells the VC the retail herd is set to buy. And in large enough quanity that 50 mill could be unloaded.

All this leg work needs to be completed by the insiders before a deal is struck. When a deal is struck, that's when the VCs take over and buy a run. They have $250k worth of stock to sell. NO problem spending $25k $50k to get the run.

Once it starts they unload the .005 cheap issued shares, to keep the run moving, then dump the run purchased shares at the top for profits also. Now you see the exhaustion spike, when they run out of the 50 mil issued and the ones bought in their run start move.

Don't forget the insiders. They aren't dumb. They are accumulating before the pop and after, knowing what's about to happen. Probably a few friends are around also. At any rate when all is sold, now the company needs to put all their cash to work to build the company. IF it wasn't an out right scam from the start.

The companies which really try to succeed normally have chart patterns I call temp job patterns. They release PR stories about what they want to do and the chart looks like a run/retrace/channel pattern. With a 3 step 3 month climb. If it's a scam from the start, the chart forms a typical pump & dump pattern and falls to the original price after the selling stops.

There you have it. My interpretation of the OTC game.