READ THIS – Why $100 pps May be Coming with Up-listing
The OTC is full of scams and most RS are done simply to dump more shares due to toxic floorless convertibles and the pps crashes after the RS. But that is not the case here.
“IF we have to believe” everything that is in the May 8K, then this is a very sophisticated and clever financial transaction and the stock once Up-listed could go over $100 in days and here is Why.
Everyone is looking at the AS and OS. But the key piece of this transaction is the “FLOAT”. No company with huge revenue does a RM with a shell to handover the value of the company to a bunch of penny traders. In this case they can do the RM and still hold onto almost all of the value of the company. Only those few retail holders who will still hold the stocks after the Up-listing will benefit greatly. Here is the key.
Although the OS is 1.8 B, the stock has a float of under 100M, and more likely 85M to be exact which is a tiny fraction of the OS. Theses many shares are only held by all of us. The rest or the majority are held by management and insiders. So the majority of the company is owned by Mgmt NOT by us.
After the 1:100 RS the OS will be only 18M but the float will be ONLY 850,000 shares or less than 1M. That’s it.
Now the question is how much would the company be valued at?
If you look at the way the transaction is being done, it is safe to assume the Mgmt. want a huge valuation and that’s why they are doing it this way. So let us say, they will go with a 15X Revenue valuation of $60M revenue, that is $900M market cap. Remember, out of the potential $900M valuation, we are only going to get less than $50M (1M shares in float). The rest $850M value creation is held by the Mgmt/Insiders. So they don’t mind doing this RM and RS and Up-listing.
$900M market cap divided by 18M OS gives a pps of $50 on NASDAQ. That is equal to $0.50 pre-split.
It can reach there in less than 2 days after Up-listing as the float will be only 850K, so not much shares to trade and no one is there waiting to dump. Plus most people can’t sell immediately after the Up-listing. It will be all frozen for few days on our trading accounts. That can push this beast past $100.
The Mgmt goal is to get as high a valuation for as long as they can so that they can raise money in a secondary offering down the road. That is why company goes public at the first place.
So buy and hold and wait to see some spectacular activities here.
AIMHO.
PS: I will try to get some ore tomorrow below $0.02
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