Drone stocks - Technical analysis tips
In today’s video update I did double-duty:
- Analyze a Drone stock (Droneshield - OTC: DRSHF) at the request of a subscriber
- Provide Technical analysis tips and strategies by example
The video ended up being much longer than intended (just over an hour), but I was able to show numerous basic and advanced Technical analysis examples.
I was initially surprised to find that several of these Drone stocks started as shell corporations that got renamed and repurposed.
After some thought, it occurred to me that it might make good business sense for a new company to start with a shell corporation that already has a listing on a major index.
Supposedly, the cost of obtaining an exchange listing is prohibitive for most startups. The cost largely involves the effort required to overcome regulatory hurdles.
Most companies desire a Stock exchange listing because it gives them ready access to funding as investors purchase their stock.
And the higher the exchange, the more access to funding. In the junior mining sector, for example, many companies start with a listing on the TSXV, then advance to the TSX, and ultimately, onto the NYSE Arca exchange.
When analyzing companies that start with a shell corporation listing, it isn’t uncommon to find the company performing reverse stock splits as they attempt to make their stock look like a good Investment.
As a conservative investor, renamed shell corporations and reverse stock splits are red flags. There are lots of stocks to invest in – putting hard-earned money into a company with these red flags doesn’t make sense to me.
One of the companies analyzed in the video has performed three reverse splits during its existence (1/150, 1/10, and 1/1200)!
These are the most common reasons a company performs a reverse stock split:
- Prevent the delisting of their stock because the price of the stock falls below a certain threshold. For example, dropping below $1 per share where the stock becomes a penny stock that can only trade with other over-the-counter stocks.
- Increase the price of each share of stock. This is simply window-dressing to make the stock look better to investors (i.e., take the stock out of and away from penny stock territory which conservative investors avoid).
In the video I also touched on the dynamics of taking a company public via an IPO (Initial Public Offering).
Quite often, the IPO event is sponsored by an Investment bank and the sponsor takes payment for their services in the form of shares in the sponsored company. These shares typically have a minimum holding period before the sponsor can sell them.
Once the holding period expires, the sponsors are likely to sell their shares in order to get paid for the services that they provided. This selling can negatively affect the price of the stock.
Watch the video for more insight into Drone stocks, Technical analysis tips, and the numerous games that get played with stock listings.
Drone stocks covered:
- Droneshield Ltd. (OTC: DRSHF)
- Unusual Machines, Inc. (NYSE Arca: UMAC)
- Red Cat Holdings, Inc. (NASDAQ: RCAT)
- AeroVironment, Inc. (NASDAQ: AVAV)
- Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS)
- Workhorse Group, Inc. (NASDAQ: WKHS)
https://satoritraders.com/blog/drone-stocks-technical-analysis-tips/
