The OTC Special Event Theory, or #OTCSET for short, is the theory that the bull market/bubble in the OTC from 2020 through 2021 wasn’t a one-off event and instead was the first wave of a bigger picture movement of massive capital flooding into OTC shells. The movement of capital represented a paradigm shift and sparked an initial phase of revaluing and repricing OTC shells, thanks to global macro financial conditions making them more attractive than ever. The current demand for businesses, especially foreign ones, to access US capital markets (dollars) has never been higher and these shells effectively offer a relatively quick and cheap way to go about that route.
Though the 2021 rallies all got wildly ahead of themselves and were destined to see severe corrections, the underlying fundamental story is what I believe is most important and largely being ignored by the retail masses.
In 2021 there were changes implemented in the OTC which required old/defunct/non or under-reporting tickers to basically either clean up their act and meet a certain threshold of reporting standards or else get bumped down to the Expert Market. This sparked an exchange wide cleanup frenzy with shells left and right finding custodians or otherwise getting cleaned up towards compliance, and thus began the great OTC shell/reverse merger bull market/ bubble of 2021.
If you ask most retail traders who participated in that remarkable bull market, the sentiment almost unanimously leans (heavily) towards it being an anomaly and fluke compromised mainly of scams with no lasting redeeming underlying merit or value. This is where I think the market is wrong.
My theory states that these shells have a lot more functional value than the market is currently pricing in. My belief is that in the modern macro financial world, these shells offer up a significant amount of value simply because they are an effective and relatively efficient vehicle for mergers, acquisitions and joint ventures where private companies can use them for accessing US capital markets (ie dollars). In effect it’s a backdoor and a cheaper/quicker alternative than an IPO for a private company to access US capital markets, which is in higher demand than ever.
The 2021 bull market was fueled by the idea that all of these shells were going to lead to immediate mergers which would lead to imminent explosive growth. Clearly that was misguided, but such is the nature of human sentiment/emotions and the herd mentality.
The ensuing 2.5 year bear market/correction was fueled by the idea that the shells and merger discussions were entirely fabricated scams and pump and dumps. I’m arguing that once again retail is overreacting but this time erring on the entirely opposite side of the spectrum. This is where we sit and where the next major opportunities are staring us in the face.