Monday, 2 November 2020

What Does DTC Eligibility Mean for Manganese X? Take a Look at PKK for One Possibility

Manganese X (MN.V) (MNXXF) announced that it received DTC Eligibility for its OTC listing in the United States. What does this mean? A simple Google search tells you this:

"DTC Eligibility means that a public company’s securities are able to be deposited through DTC. DTC is the largest securities depository in the world and holds over thirty-five trillion dollars worth of securities on deposit. DTC accepts deposits of securities from its participants only, who are usually clearing firms. Most brokers clear stock in-house or hire a clearing firm to do so on their behalf. All movements of securities are made to the participant’s account electronically with book-entry adjustments."

Basically transactions can occur more easily on the OTC symbol in the United States. Luckily, I have some experience with this through my largest and longest holding, Peak Positioning Technologies Inc. (PKK.C) (PKKFF). Having seen transactions occur on PKKFF for years under its symbol pre-DTC, I noticed that whenever volume occurred in the United States, a corresponding trade occurred on the CSE. For instance, if there was a buy order transacted on PKKFF for 100,000 shares, I would see a 100,000 share order go through the CSE. The seller would be some kind of traditional Canadian retail broker (TD, RBC, Cannacord etc.) and the buying broker would be more U.S. or International in nature (Merrill, Pershing etc.). It was obviously the same trade that actually took place on the CSE because the OTC had no inventory of shares on the U.S. side. A lack of inventory, while not making it impossible to transact on the OTC symbol, makes it very difficult. 

Obtaining that DTC eligibility is a game-changer for a stock. It's now easier for U.S. investors to buy and sell the stock and therefore increases their demand for wanting the stock in the first place. Coupled with an awareness campaign, this can result in positive near-term performance for the stock price.

One needs to look no further than PKKFF to see what can happen to a stock immediately following DTC eligibility. Peak got its DTC eligibility on September 17. Review the price history for PKKFF for the last several months. Prior to this date, PKKFF was trading at $0.345. Other than September 16 with volume of 175,000, it hadn't seen a day with more than 50,000 shares traded since July 30. Generally speaking, PKKFF would see one or two days a month with over 50,000 in volume and most days with less than 10,000 in volume. A month and a half later, PKKFF is up to $0.60. In the eleven trading days between October 19 and November 2, PKKFF has traded at least 50,000 shares each day and has averaged over 170,000 shares traded during that time. For a 5-digit OTC stock, consistently trading around $100,000 worth of shares in a day is actually pretty good. This obviously corresponds to an increase in price and volume on the Canadian side too.

The increase in interest in Peak hasn't been solely due to the DTC. The company has had a steady news flow since then and has been featured on the Wall Street Reporter's "Next Super Stock". But that's kind of the point. Intelligently run Canadian small cap companies don't just get DTC eligibility for the fun of it. Nor do they try to promote themselves to a U.S. investor audience without it because that endeavour would be a big waste of time if most Americans have to jump through hoops just to try to buy the stock.

MN's CEO Martin Kepman, said the following in today's press release:

"DTC eligibility provides access to a broader base of investors in North America particularly in the US and heightens our visibility in the capital markets thereby improving our share liquidity."

It shouldn't be too hard to read between the lines on this one. Given the legitimate Tesla connection which I have previously outlined as well as the company's latest venture with PureBiotics, this is a relatively easy story to tell to a U.S. audience. 

It wouldn't surprise me if the performance of PKKFF over the last several weeks is like a window into the future for MNXXF.

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