My theory argues that the conditions are better than ever for an OTC shell to find merger and acquisition targets, and that the unprecedented strength seen in many of these SET charts will lend themselves to a somewhat smoother path towards raising capital, uplisting and ultimately growth than historically we’ve seen. That being said, I’m not arguing that we won’t still see plenty of scummy activity and behavior, whether from the companies or the market makers and hedge funds. When capital is flooding into any given market, the scammers, grifters and shysters all come out the woodwork.
When it comes to manipulation from market makers and hedge funds, the more they are caught short and have to lose, the more likely it is we’ll see shenanigans which includes bull traps, shake outs and God only knows what else. A strong SET chart doesn’t mean we’re going to avoid the dirty tactics, if anything they may be even more targeted because of their potential to squeeze so hard if they’re not held down.
When it comes to dirty tactics from the companies themselves, the theory argues that these shells with the cleanest and strongest long term charts/trends are going to have much more value when used as a legit vehicle towards growth, so then by extension that implies that it could help to price out the scummiest actors. This is one of the reasons I am adamant about sticking to this specific SET chart pattern, because in theory it should help to weed out some of ugliest aspects of the OTC.
After the 2021 clean up process in the OTC, there are more shells than ever that could be used for mergers, acquisitions or just scams trying to take advantage of the hype. What are less common though are the shells with clean(ish) secular uptrends, and as I’ve been arguing I believe those are going to be more valuable to someone who actually wants to execute on a legitimate long term turnaround and growth play. If someone wants to just take advantage and use the hype to put together a half ass merger play, they’re likely just going to use a cheap shell, ie one without the SET qualities. There are plenty of those too.
Keep in mind that dilution is likely going to be part of every shell turned merger play, whether it’s a SET chart or not. The reason companies go public and the reason I believe these shells to be undervalued is because they’re vehicles for raising capital at a time when it’s in high demand. The whole theory stems from the idea not that SET plays won’t see dilution, but that they will be able to absorb it more readily than other plays and thus will give management the chance to execute a long term growth plan with better chances of success.
A nice strong secular trend doesn’t make a stock immune from shenanigans, but it at least lessens the odds of being victimized by it to some degree. This is the OTC and the risks are wildly high, don’t mistake my theory as a can’t miss shot. This is all about odds/probabilities and risk vs reward. If the Special Event Theory ends up ringing true, then in theory that would imply the highest quality charts would have better odds of a quality game plan and lower odds for shenanigans. Ultimately though these are highly speculative gambles so please appreciate that fact and trade accordingly.