Wednesday 10 July 2024

A Reverse Split Microcap Play That Could Go On A Massive Run

There have been numerous small float penny stocks that have had incredible reversals and sustained runs lately. Some of them on little to no news. Inspire Veterinary Partners, Inc. (IVP), Zapp Electric Vehicles Group Limited (ZAPP), Soligenix, Inc. (SNGX), Longeveron Inc. (LGVN) and NaaS Technology Inc. (NAAS) just to name a few. Kazia Therapeutics Limited (KZIA) is an example today that is up around 300%, but that's on great news from a Glioblastoma trial that might be worth a look as a multi-day runner to $2+. Like all of these stocks it has the risk of dilution. But right now even with the risk of dilution and even post-financing announcements, that has not stopped these stocks from continued runs so we don't see how KZIA should be any different. One stock that fits the bill perfectly to these others is Beneficient (BENF). After running over 100% on July 5th, its pullback into the mid $3's is an excellent level to buy in for a lottery ticket type of purchase. If you like our picks you can follow this blog by clicking the follow button on the top of the left hand panel. We have 1015 followers on here as well as 120 followers on our Canadian blog. You can also follow us on Twitter @StockTradePicks which has over 5,000 followers.

BENF announced its year-end results on Tuesday and they were absolute garbage. Think of this company kind of like a B. Riley Financial, Inc. (RILY) or Upstart Holdings, Inc. (UPST) on crack and then you will understand why it has struggled since it went public. The market initially reacted negatively, bringing the stock down to $3.03. However, by the end of the day it raced back up to $3.95, actually finishing green. Wednesday's trading has seen it bounce between $3.50 and $4.00 on light volume and large spreads. This trading indicates that it's the mirror image of a "sell on news" event we see with runners. BENF's performance has been bad. It has an open SEPA and going concern clause. But it has already dropped from a reverse split-adjusted 52-week high of just under $300 to all the way down to $2 before the slight bounce. It looks like the bad news is priced in, at least for now. Almost certainly the company will tap into the SEPA at some point in the future, but it will need to do so on a high volume, high pump day. It doesn't look like it happened on July 5th, so there will be another day that it will run. 

ZAPP looks like BENF's closest comparable. An absolute financial disaster that has tanked massively since going public but has recovered considerably since its reverse split fueled lows. On June 5th, ZAPP increased from $0.71 to $2.43 on over 54 million volume before pulling back to under $1.50. It shot up again on June 20th before a quiet period of low volume and large spread trading around $2.00. Since the start of this month it has not looked back and has hit nearly $20. That is the type of trading we are looking for on BENF. We think it's a good idea to buy a lottery ticket position then add to it once volume and price starts gaining momentum again. It will be quick but those who are watching it closely should be able to capture an awesome run.

Disclosure: We are long BENF and KZIA


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