Defense Technologies International Corp (DTII)

[Poco Parvenu]

That's what is called a paint ...

We all know that painting the tape is legal in the United States. The Securities and Exchange Commission (SEC) enforces regulations against painting the tape and similar attempts at market manipulation.

We all know that trading stock is a two way transaction, someone sells shares to a someone who wants to buy shares.

Market makers—usually banks or brokerage companies—are always ready to buy or sell at least 100 shares of a given stock at every second of the trading day at the market price. They profit from the bid-ask spread, and they benefit the market by adding liquidity.

It is often felt that the Market Makers manipulate the prices. "Market Manipulation" is an emotive term, and conjurers images of shady deals and exploitation. Market Makers are not elusive companies that appear then vanish overnight. Market Makers are duty bound to make a market and to meet the needs of those they are responsible, to this end they may try to influence the market.

Market Makers are however known to lower prices to "panic" investors into selling, sometimes called "shaking the tree"? Moving the price up, encourages sells, moving it down also encourage sell, hence also the term dead cat bounce when a Market Maker will mark a falling stock up to encourage buyers in thinking they have reached the bottom.

When you buy and sell shares in most circumstances (SEAQ/AIM) your broker has to go through a Market Maker. The Market Maker works for an institution that makes a market (will buy and sell) that particular stock. They provide the market with liquidity - i.e. there will always be a price you can sell your stock at, there will always be a price you can buy some stock at (unless the share is suspended).

Market Makers obviously have a degree of risk. If there is a flood of sellers, because the Market Maker's job is to provide liquidity, he has to buy those shares even though the rest of the market may want to sell. If the price continues to fall he could be left with a lot of stock on his hands that he paid considerably higher prices for than he can sell for now. And vice versa - if a share is rising sharply the Market Maker has to continue selling the stock to the buyers - he could end up "short" of stock. In this situation he has sold stock he has not got, to fulfill all the buy requests, and he has to buy this stock in to balance his books, but at higher prices and makes a loss.

There are several ways of manipulating stock prices in the market. Deflating the price of a security can be achieved by placing a significantly large amount of small order at a price that is lower than the current market price of that security.

Investors interpret it as a signal that there is something wrong with the company. A negative perception pushes investors to sell the securities, thus pushing the price of the stock even lower.

Then there is a technique called nonsense negativity on social media or company message boards, where well thought out negative posts that show why a company isn’t doing well, or isn’t going to do well. This also manipulates price. These are posted by paid manipulators or inexperienced investors frustrated by the direction of the stock price.

By reading the latest 10Q one notes that DTII has a convertible note coming due:

On March 22, 2022, the Company entered into a one year convertible promissory note for $91,350 with Red Road Holdings, LLC. The note has an OID discount of $12,600, bears interest at an annual rate of 9% and is convertible into shares of the Company’s common stock at 80% of the lowest trading price 15 days prior to conversion. The note at initial issuance using the Black Scholes model with computed volatility of 338% Discount rate of 0.25%, The Company recorded a debt discount of $91,350 at the inception of the note. As of October 31, 2022 the balance of the notes was $68,512, net of discount plus interest.

The pricing for DTII is not surprising, nor is the current volume. Again, buy low, sell high comes to mind to make coin on DTII, which happens quite a lot for savvy traders.