Water bottle with covered straw

2023-03-30
DogshitHandGrenade
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Not financial advice. I am a potato. Do your own DD and make your own decisions
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1 DILUTION The word of the month
I blame TRKA. A month ago 90% of the people on /ShortSqueeze and StockTwits didn’t even know what the word meant. Though it had something to do with chemistry class. TRKA woke everyone up to dilution but in a very extreme way. TRKA got f-cked. 600% dilution for zero dollars. This was epic, and it make dilution a nasty new word to the whole community.
Here is the reality on dilution. It is like inflation. EVERY COMPANY DILUTES EVERY QUARTER. Every one of them. From PXMD to Amazon. It is part of the business. 90% of companies are prudent in their dilution like PXMD is. TRKA, AMC, and a lot of them are screwing over shareholders by 100%+ dilutions. It’s gross and why TRKA deserves zero of anyone’s trust.
Every real professional investor knows when they price a stock in Aug 2022 IPO at $5.50 that the stock will experience dilution. It was especially known on a pre-revenue Pharma company. It’s just, do you trust the execs or not. It’s no different than having cash in your bank account but knowing the currency is going to inflate and you will lose purchasing power. You don’t go dump your dollars for pesos do you? As long as the dilution harvests cash, it’s pari passu.
What we saw on LINCOLN was a modest, 1.2m share offering to harvest $2.8 cash. This is a 10% dilution. There is nothing scary here. They got a really great capital injection that furthers their runway about 1.5 Quarters. I can see that maybe PXMD Execs were getting really nervous given the market sentiment and they wanted to modestly raise additional capital to weather a 2023 recession. They didn’t need to do this, but in their calculation it was prudent.
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2 Mapping the LINCOLN Dilution
LINCOLN got 1.2m Shares for $2.33 average price. I want to know when those shares were given to LINCOLN and likely sold into the market.
I know it wasn’t before 2/2, or if it was, it was a minimal amount because. This is because the exchange cap in the 2/2 LIND agreement made clear that on that date 12m shares was 20% of the outstanding. Prior to this outstanding was 11.7m. So MAYBE LINCOLN could have received at most 100k shares Pre-2/2 LIND agreement.
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Here is how I think the sale schedule went:
Pre-2/2 – 100k – @$2.3
2/3 – 300k - $2.70
2/6 – 250k @ 2.97
2/10-2/22 – 75k / trading day – ~600k @ $2.11
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This gets you the 1.2m shares and it has a weighted average of just near $2.33. So I imagine it went something like that. I’ll explain the dates.
2/3 and 2/6 had very high volume and high prices. I can see PXMD just wanting to be opportunistic now that the LIND agreement was closed. Not what I would have done, but perhaps they were nervous given the shaky market that they need to start squirreling away cash even at lower prices than they wanted to. They still did a very limited sell to limit dilution as much as possible.
From 2/10-2/22 you see a stairstep down in price. I think they sold 75k on each of these days. When you look at the CTB over this period you can see it stepping down. This makes sense as more volume becomes available to borrow. The CTB continues to step down as the brokers adjust to the new amount of shares in the system. We are still at an INSANE 400%+ CTB.
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https://preview.redd.it/pn917dzbnwqa1.png?width=907&format=png&auto=webp&s=af54ed57e43dcd374b2b626402e8ad7166e7843e
Batches of sales in white, CTB stepping down in Green Line
It is my belief that LINCOLN sold all of these immediately upon receiving them on those date. You can see it in the price action stepping down. Also LINCOLN has never held over 600k shares because they would have forced them to report it to the SEC. If LINCOLN did hold 600k shares through this low period in February they would have certainly sold on 3/14 where there was 19m volume and price spiked to $2.90.
I DO NOT BELIEVE LINCOLN HAS ANY SHARES RIGHT NOW THAT COULD EFFECTIVELY CAP THE SHARE PRICE OF THE SQUEEZE TO $2.33. THESE SHARES LINCOLN RECEIVED ARE ALREADY IN THE MARKET AND LIKELY IN RETAILS HANDS. And retail isn’t selling except for some weakness we’ve seen this morning. We’ve hit the floor well and held up.
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3 So What Happens Next
This changes nothing for the shorts. The FF is now around 2.0m shares, up from 818k shares. It is still highly likely the float is locked up by retail, it is only $4m after all which is nothing given the number of followers on this stock.
How do I know this changes nothing for the shorts? The CTB is still well above 400%, that means despite the dilution and high FF the stock is extremely hard to borrow. When you look at the Interactive Brokers you see there are still no shares available.
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https://preview.redd.it/yqfyyyhdnwqa1.png?width=610&format=png&auto=webp&s=4c95160eb207f73de05c3fc82666926a621c0c8a
Nothing about my chart from my Youtube video that I’ve been showing about shorts being underwater has changed. The calculations had nothing to do with dilution. They massively shorted the bottom of a stock and they’re stuck here bleeding.
Shorts still need to cover 500k shares in a stock where nobody is selling. Even the smallest amount of covering is causing massive spikes. This will continue.
Ortex will update the FF and it will appear like Short% took a huge dive. This does not mean shorts covered. You will now want to pay attention to the bottom number which is the total amount of short shares. That number will not change other than it’s normal daily fluctuations.
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https://preview.redd.it/ncuu5gzdnwqa1.png?width=693&format=png&auto=webp&s=79da0ccabcd8a032f2d9279e577716bdbd814397
This play is still on, this is still a massively shorted stock. I went back to my first DD from last week on PXMD and we were all excited because Short% was 40%.
The reason for the short% going down today is because some retail is selling and some shorts are covering with retail shares. This has appeared to stop at $2.08 solid floor. Now the waiting game is back on. Shorts are still bleeding and some of them are going to want to take this opportunity to cover lower, sooner.
The only thing I am changing to my strategy is where I sell. The dream of $7 to 10 is looking more difficult to achieve in a squeeze in my opinion because there are more shares in the float which means more changes for retail to capitulate and give up their shares for a gain and resolve the shorts. I can still see this spiking to $5. Shorts unfortunately for them, despite the modest increase in free float are in the same position. They are bleeding and need to cover or hope you all sell your shares down here.