Destiny Media Tech Inc (DSNY)

[wvumountaineer78]

Here Is The Most Recent Weekend HTFBSN Update On DESTINY:

January 19, 2014

Destiny technical update… tick Tick TICK

Last week, HTFBSN gave our fundamental opinion on Destiny and said that we were waiting for Friday’s closing price to give our technical opinion.

It appears as though the “perfect storm” for DSNY may be brewing.

Friday’s closing price with extremely heavy volume triggered two technical indicators we use. Technical analysis is an art, not a science, so it should be used as another tool when investing. In the next few weeks, starting with this past Friday’s close, we could see four types of investors coming into Destiny. It is our opinion that two of the four conditions started to appear on Friday. Regarding these developments, the four kinds of investors are as follows:

1. Technicians. The chart pattern for DSNY had been drifting down for a few weeks and reached extremely oversold conditions. However, Friday’s’ high volume reversal and Bollinger Band close are two patterns many technicians look for. Accordingly, these two powerful technical indicators were triggered on Friday.

2. Insider buying followers. Management said they would be executing an employee purchase program. In addition, this combined with the employee options that were exercised/converted should be reflected in S.E.C. filings. There are a lot of investors that will invest in companies just based on insider buying alone.
Likewise, there are two other conditions that could be developing in the next couple weeks.

3. Uplist investors. As we already know, Destiny has announced they will be trying to get uplisted to the NASDAQ. There are investors that will buy ahead of this event. Savvy investors, knowing that a NASDAQ listing brings in institutional investors, try to buy ahead of this uplisting.

4. Short-squeeze investors. There are investors (we know some of them) that will specifically target a short-squeeze opportunity. As subscribers know, there may be a very large naked short position (http://en.wikipedia.org/wiki/Naked_short_selling) in DSNY (we have discussed many times before).

As previously stated in our first January update, they WOULD NOT want to see Destiny get NASDAQ listed. In a smartly calculated move by the BOD, not stating a specific reverse split ratio prohibits a short-seller from knowing what price to keep the stock trading under to prevent this. Indeed, for the past 4-6 weeks notice how there was serious resistance at $2 the closer DSNY got to receiving NASDAQ approval. We don’t think this was a coincidence. Even more, this shorting entity now knows Destiny could implement an undetermined reverse split by the shareholder’s meeting February 25, 2014. Besides, DSNY would only need the stock to trade at $3 (after or before a split occurs) for five trading days and they determine if/when to reverse split keeping any naked short guessing.

With all this being said, there is very much a possible short-squeeze situation setting up here. Rest assured, if HTFBSN sees this starting to develop, we plan to notify our short-busting friends.

In our opinion, the reason this alleged naked short couldn’t be busted before now is that the amount of available shares they could sell previously has been unlimited. At a stock price of $1.99, the company has a market capitalization of roughly $100M. In this case, the shares are still unlimited, but the price and market cap they would have to continue selling short could be down to $31M.

At this point, HTFBSN wants to lay out a hypothetical situation we think is possible:

Destiny‘s chart showed a major reversal on Friday. Previous to that though, it is certainly not uncommon to see immediate selling from a reverse split announcement and any short would know this. Still, we think the knee-jerk reverse split sellers and lackluster conference call sellers are now out. If a short was expecting heavy selling, or capitulation from these two events, they got it in spades. Conversely, the very heavy volume reversal on Friday appeared to put in a short-term trading bottom on a still uptrending stock. Similarly, picture a person walking up a hill using a yo yo. While the yo yo goes up and down, the overall trend is up. That is precisely why we recommend using weekly charts instead of dailys.

What is a “short-squeeze”?

When many investors have sold short a stock on the hope that its price will plunge, sometimes that price may begin to rise. As it does so, more and more of these “shorters” will “cover” their investments. That is, they’ll buy back the shares that they had shorted, and take a loss. The reason for the loss is that they’re having now to buy back the shares at a higher price, and they are trying to minimize this loss by covering. As more and more shorters do this, the price rises (since more people are buying than selling). In a nutshell, this is a short-squeeze.

More importantly, the ultimate short-squeeze occurs when some savvy investors manage to corner the market in that security, making it impossible to cover the short position. As a consequence, short-sellers can take unlimited losses, because theoretically the market value of the stock becomes infinite!

We do not know with certainty if there is a naked short position or how large it could even be. There is speculation out there, which based on the attempted $35M Noramco financing that was cancelled; there could be a naked short position as large as 5M shares. Again, this is supposition, but we do know that there was an entity or entities that did their best to keep DSNY’s share price under the required $2 for NASDAQ listing.

Let’s paint this scenario… (all based on an alleged naked short position)

We have to assume that any naked short-seller does not want to see Destiny get their coveted NASDAQ listing, and would be highly motivated to cover before this event happens.

Now that DSNY has announced they could implement a reverse split, HTFBSN doesn’t think a short-seller has a reason to keep the share price under $2, or even $3 for that matter. This shouldn’t keep Destiny from getting listed now, because they could do the reverse split, raising the share price up by a factor of five. With this in mind, let’s say DSNY did implement a one for five reverse split on February 25. The shares outstanding would go from 52M to approximately 10.4M. Likewise, theoretically the share price would also go up by a factor of five. So Friday’s close ($1.84 times five) gives us a reflective share price of $9.20. Following this logic based on our understanding of the NASDAQ $3 requirement; in five trading days from the reverse split date, a short would have to drive the price down under this level in order to continue delaying the NASDAQ listing. Based on the NEW shares outstanding, they would have to force Destiny‘s valuation to under$31.2M (10.4M times $2.99). This would be a monumental task and we think highly unlikely.

Still painting here…

Remember those four types of investors? By the same token, we want to introduce a fifth type of investor. He is the “new high” buyer. There are a lot of investors out there that will simply buy ANY new 52-week high. As we know, DSNY‘s 52 week is $2.93. In contrast, now that Destiny could implement a reverse split, that old $2 resistance (or $2.93) should no longer be an issue. As previously alluded to, there would no longer be a reason to keep the share price under $2, or even $3 if DSNY does indeed implement a reverse split.

Time to frame our “what if” picture we have painted.

What IF all five of these investors come into the market driving Destiny’s share price to a new 52 week high? What IF the company announces a big brand as a licensing partner by the annual shareholder’s meeting which would validate the technology? What IF the company does trade at over $3 for five days? What IF the stock does indeed become marginable over $3? What IF the alleged naked short-seller is forced to cover by the AGM?

Heavy questions for sure and here’s another. Would the company even need to implement the reverse stock split? These are just our ponderings. Above all, a wise hypothetical shorting entity should be considering these same ponderings in HTFBSN’s opinion!

Incidentally, we all know what happened to Captain Billy Tyne.

… One thing we have learned in over 25 years of investing, the chart never lies! Hence, many times a chart will reflect good/bad news or fundamental changes before they are publicly announced. In that case, from a technician’s perspective, Friday’s very high volume reversal was very bullish.

At this point, let’s throw in one more little pondering for ALL to consider here. If some of these short-squeeze message boards were alerted to this specific hypothetical situation, the results could be, shall we say… interesting.

http://www.shortsqueezeit.com/search.html
http://investorshub.advfn.com/Short-Squeeze-Cover-Days-14721/
http://investorshub.advfn.com/Mother-Of-All-Short-Squeeze-%28MOASS%29-9525/