Historically it rarely happens that an OTC company or shell can make it from the gutter all the way to the promise land of being a profitable business and uplisting to a major exchange. Either the company proves to be a scam, a major failure or even if it’s legitimate they tend to have such an arduous path to raise capital that it inevitably destroys all the current shareholders as it tries to survive. A distressed chart equals a distressed company, and a distressed company has to raise capital via toxic convertible notes.
My Special Event Theory hypothesizes that a clean secular bull trend on a ticker’s chart can help a shell/company towards that goal of raising capital to grow while not destroying it’s current shareholder base, thanks to being able to raise capital (ie dilute) into a relatively strong market for their shares. But do I have any examples of this ever happening? To a large degree this is a fairly new concept for a number of reasons. Merging with an OTC shell is more attractive now than it was in years past, especially for a foreign business who desperately need to access US capital markets (as the dollar trades at 20 year highs vs their currency).
The other problem is historically there are rarely secular uptrending OTC charts in the first place, at least prior to 2021. The cleaning up of hundreds of OTC shells on defunct tickers made it so for the first time ever there were literally hundreds of long term higher highs in the OTC market. So with that in mind, this movement I believe we’re witnessing only began in 2021, so this should be the phase where we will begin to see examples of this taking place – if the theory is correct.
That being said, I do have an example of a ticker which followed this very formula and is ahead of the curve vs the other #OTCSET plays I’m following. Hopefully this is a beacon for other SET plays to follow. $DFCO was an empty and defunct shell for many years until the owner began it’s cleanup process in 2018. That prompted a breakout to a new almost 10 year high back then.
Beginning in 2018 the company began the process of raising capital to find suitable acquisitions and if you notice the chart was able to steadily form higher highs and higher lows throughout the process. This is especially impressive because from 2018 through much of 2020 the market wasn’t very favorable for OTCs and this one had low liquidity, so for it to continue to be able to raise capital and grow while maintaining a secular uptrend is quite impressive.
The company has managed to do something very few OTCs have done, which is go from a shell to a growing business, raising ample capital while not only not destroying shareholders but actually enriching them along the way. The share structure has been able to grow at a slower pace than the company as a whole, and I believe that’s largely due to management having a clean strong secular uptrending chart to back their efforts.
The company states that they’re on the verge of being net profitable before the year end and have taken virtually all of the steps required to uplist to the Nasdaq. They’ve also stated they plan to hit the $4 target price requirement without needing a split to get there. That remains to be seen but so far they’ve executed on this plan impeccably well and it’s my belief that the strong secular chart trend is going to allow them to achieve this last goal of theirs.
To add further evidence to my claim, the company’s CEO has been a buyer for his company’s shares for the past few years, which historically is almost as rarely seen in the OTC as secular uptrends are. I don’t believe it’s a coincidence that this shell turned growth play started out as a chart with an exceptionally strong secular uptrend, which is still in tact, and that the CEO has been buying shares out of his pocket for years now. I don’t believe the company could have accomplished all of this if their chart was stuck in a long term downtrend with lots of toxic overhead resistance to have to fight back through, which would have made raising capital nearly impossible without destroying the shareholder base (which historically is the status quo in the OTC).
For full disclosure, I am invested in $DFCO and have been since 2018. This is when I first began to appreciate what a secular bull trend on this time frame could mean, and ultimately this is the seed where my theory grew from. I recognized how big 2021 was because so many tickers mimicked what $DFCO had already been doing, it just took me a while to put all the pieces of the puzzle together.
$DFCO is in essence a textbook SET pattern except it’s about 2 or 3 years ahead of the rest of the group because it didn’t wait for 2021 to clean it’s act up. Should it be able to confirm my beliefs and break it’s 2021 peak and signal a secular bullish continuation trigger (on it’s way to $4+ and a Nasdaq uplisting), I believe it will help open up the door for others to follow in it’s footsteps.
Since $DFCO is roughly 2-3 years ahead of many of these other SET plays, does that mean that the others will need that much time to catch up to where it is? Not necessarily. Like I said, the first few years of it’s turnaround were during a pretty bleak OTC market, so that likely dragged out the process and slowed things down considerably. Should the market, especially for OTC shells, heat up like I believe it’s already starting to do, that will speed up the capital raising process considerably.
I do think $DFCO can be a harbinger for what’s to come in the OTC shell market as it’s already done much of it’s heavy lifting and is on the precipice of accomplishing what others are now embarking upon. As I’ve stated before, my #OTCSET is still very much a theory so I’m actively looking for more and more evidence to confirm it as being more than just a theory. $DFCO has grown their company from a shell to being on the doorstep of profitability and a Nasdaq uplisting, all while keeping the shareholder base alive and well. If my theory proves true, it should open again to retest it’s 2021 peak as the necessary catalysts are waiting in the wings. Once it can accomplish this, it’s game on for other SET shells who now have a blueprint to follow.