Most people who are reading this know about TOP Financial Group Limited (TOP) and AMTD Digital Inc. (HKD). The former ran from $6 to as high as $250 in three days a little over a year ago and the latter ran from $20 to $2,500 in a couple of weeks shortly after its IPO in late July and early August 2022. There is not just one, but two low-float, light volume and proven volatile Asian listings that have a shot at going parabolic like these stocks. Not only that, both of these stocks have the same admitted short on them. Meaning if one runs, the other is likely to follow as the short will be subject to a domino effect of margin calls. Those two stocks are Nisun International Enterprise Development Group Co., Ltd (NISN) and Regencell Bioscience Holdings Limited (RGC). This short is spamming various fintwit platforms, trashing both companies, so we know they are desperate. 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 1016 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.
Update 7/29: With RGC up 35% and NISN up 22% on Friday, shorts are in even greater trouble. NISN is particularly interesting as it is rising on only a couple hundred thousand in daily volume. When LPA exploded to $500 in late May, it did so on 200,000 shares. Light volume stocks are the ones with the best chance to explode in price.
Update 7/30: RGC and NISN continued their rise on Monday. 9% and 11% respectively. Though they did pull back from their day highs. Notice the strong correlation in their charts. Shorts were trying to push both down in the afternoon but then both shot up near the end of the day. Squeeze potential remains strong with both of them as shorts are getting desperate.
The short in question runs the Reddit forum Vampire Stocks. Their analysis on NISN is filled with errors that they admit exist in the comment section when users bring them up. Their analysis on RGC claims that they are now short but admitted that they badly lost on the company in the past. So they have been subject to short squeezes before but apparently haven't learn their lesson on the exact same stock and want to do it again in order to fulfill their loony bin fantasies of all Chinese listings being run by criminals.
We consider NISN to be the most undervalued stock in the world. Revenue growth was 65% and EPS was $4.46 for 2023 while the company ended the year with cash per share of $29. Working capital is $182.2 million, or over $45 per share. There is absolutely no reason for this stock to be trading less than $50, at that would imply a P/E ratio of just 11x and trading at barely over 1x of its working capital. With the CEO and Board of Directors looking at ways to maximize shareholder value, they could easily enact a buyback plan or special dividend that sends the stock flying while putting hardly a dent into the substantial cash balance.
Since that write up from a couple of weeks ago, the stock has started turning back up after a pullback into the $7's. It closed at $8.34 yesterday, the highest close it has had in over a week. The one-month chart looks really strong for a breakout as the mini-downtrend from the pullback has been broken:
RGC is on the opposite spectrum in terms of fundamentals. As an early stage biotech, it has no operations and doesn't seem to be doing much of anything other than early stage work. According to the short, it's a worthless shell. But that's okay, because what we are looking for is a tight float and volatile trading for a potential squeeze. We aren't looking for long term fundamentals here, just like on HKD and TOP. The CEO spent over a million dollars to purchase shares on the open market back in 2021, despite already owning about 80% of the shares outstanding.
The stock has already gone on a wild ride from $3 to $30, and has since pulled back into the $10's in early morning trading today. That's okay though. Why? Because it did a very similar pullback two years ago:
August 20, 2021 is very reminiscent of the trading that took place two days ago. Yesterday's pullback was similar to August 23 while today is another quiet day trying to form that base. We will see if in another day or two if RGC screams into the $40's like it did back then. If this is a boiler room pump and dump like the shorts claim it is, then logic would suggest that the same boiler room can get the same level of activity as last time. One key difference is that volume has been much lighter. This is important because the most notorious runners (HKD, LPA) do so on extremely light volume. RGC traded barely over a million shares each of the past two days. Unlike "small float" dilution scam type of stocks which allegedly have only a few million in the float, but will trade 10's of millions of shares in a day and go nowhere. RGC trades like a stock with only a 1.5 million float. So does NISN with its 3 million float, trading a few hundred thousand shares or less each day. That actually gives both stocks credibility.
Shorts can scream pump and dump with Aegis and Maxim until the cows come home, but neither of these stocks trade like traditional Aegis and Maxim pump and dump dilution scams. Both of them have had stable shares outstanding for years. Their "pumps" are relatively stable, not like stocks that go from $1.00 to $10 then back to $1.00 on 100 million in volume within a matter of a day or two.
Funny enough, if RGC and NISN announced a business combination, both of those stocks would absolutely go flying. NISN has the cash and fundamentals to support a high valuation while RGC has a story that has been proven to get the market's attention. That would destroy the shorts.
Disclosure: We are long NISN, RGC
No comments:
Post a Comment