Tuesday, 23 November 2021

Why Graphano Keeps Skyrocketing While Manganese X Isn't

Graphano Energy (GEL) was born out of a spinout of the Lac Aux Bouleaux Graphite Property from Manganese X Energy (MN). At the time, the spinout was worth less than a penny per share to MN shareholders as each shareholder got one GEL share for every eight MN shares they owned. Before a 1 to 6.5 reverse split, GEL's value was deemed at $0.05. As in other words, although it was a highly anticipated event by shareholders, it was supposed to be an afterthought to MN's overall business and value.

Fast forward a couple of months and GEL has skyrocketed to as high as $1.20 from a split-adjusted $0.325, while MN has remained relatively flat. At an $0.89 close, GEL is valued at a $13.5 million market cap. MN is valued at a $48 million market cap. These relative market caps hardly lead to a conclusion that GEL was an afterthought. What happened?

GEL raised $4 million in a private placement in which I was involved. Subtracting the cash balance from the market cap, the LAB Graphite Property is worth $9.5 million under GEL. In a battery metals super bull, valuing this prospective, early-stage property at this amount seems reasonable, but it was certainly never valued this much under MN. Incidentally, GEL has 12.3 million warrants exercisable at $0.52 which are now deep in the money. The exercise of these warrants would bring in an additional $6.4 million for a total of more than $10 million in cash, but would also increase the share count to 27.3 million. The fully diluted market cap at $0.89 is $24.2 million and therefore the LAB property would be valued at $14 million. 

Here's the reason why GEL is going up. It has 15.1 million shares outstanding. 12.7 million are owned by the private placement holders at the time of listing and the remaining balance owned by MN holders through the spinout. The 12.7 million warrants will naturally also be held by the private placement investors. Apparently U.S. investors who got GEL shares in the spinout haven't gotten their shares yet. Sucks for them, but it's great for the rest of us. That means there is even less GEL shares in the hands of people who don't know how to trade penny stocks.

Private placement investors are smart, patient and know value. When they decide to sell they don't behave like morons who dump everything onto the market, killing momentum. They sell a little bit at a time. For instance, I sold 10,000 GEL shares today, 9,500 of them being at the all-time high (for now) of $1.20. 10,000 shares only represents a small amount of my holding and what I was comfortable with selling today. I had no intention of selling all of my more than 170,000 shares.

Contrast that to MN. MN has been listed for a while, has 124 million shares outstanding, and many of those are in the hands of retail traders. MN is owned by too many retail day trader dummies who think charts are worth something on penny stocks and dump their whole position when it's up a few percent or it hits a stop loss. GEL only has 2 million shares that are in the hands of these type of people. 

If you want MN to go up, stop being an idiot. You have GEL as a perfect example of what happens when SMART investors control the bulk of the float of a stock. Learn to use limit sell orders and split your sells into small chunks. Do not use stop losses and throw all technical analysis out the window because it doesn't work for penny stocks. Simple as that! We are in a battery metal bull market. There will be demand for companies in the sector that are showing strong momentum backed by business developments. MN fits that description well as we are expecting its PEA soon. 

Dummy retail day trader rebuttal: Yes technical analysis DOES work on penny stocks!

Me: No it fucking doesn't, you moron. I've been doing this since 2003. I know what I'm talking about. Penny stocks can be easily controlled by institutions and other people with money because of their small market caps and floats. They know the Canadian market is filled with idiotic sheep who think they know what they are doing. They intentionally manipulate the charts and TA signals to get the sheep to walk off the cliff for them. If you personally have made money doing TA on penny stocks that's 1. purely luck, not skill and 2. likely a function of the TSXV/CSE super bull market we have seen the last couple of years. A rising tide lifts all boats, even those captained by a fool. TA does work on stocks like Apple, Telsa etc. because those stocks have enormous market caps and can't be controlled by the buying and selling of any one entity. Therefore, charting analysis makes sense because it's a true indicator of recent demand and supply of shares by many market players. Stop spreading your dumb bullshit all over MN so that it bounces up two pennies to $0.40 then back down two pennies to $0.38.

Wednesday, 17 November 2021

Why I Remain As Bullish As Ever On Manganese (X)

There are two themes I see a lot of in the investment community lately. Inflation and battery metals. Well, let's combine the two. EV battery manufacturers are under pressure to reduce the cost of their batteries, which is made doubly difficult during inflationary pressures. Therefore they will be motivated to find the cheapest materials possible.

Right now one of the cheapest materials on a per pound basis within a battery is manganese. That means manufacturers are motivated to use more manganese at the expense of other more expensive materials. I have pushed the manganese narrative and specifically MN for a while, but that narrative hasn't changed. See this recent article:

https://www.argusmedia.com/en/news/2266091-tesla-to-shift-all-standard-range-cars-to-lfp-battery

 


When people ask about lithium, they have a few choices in the billion dollar range - LI, SLI and LAC. Along with a bunch of smaller players like VLI and AN which I have mentioned before. This isn't the case for manganese.

There are a few larger conglomerates like South32 in Australia that have significant manganese operations but aren't exclusively so. In Canada there are only a handful of microcap choices for manganese pure-plays - MN, EMN, EMM - AMY has manganese in its name but isn't a miner or explorer in the traditional sense. What I'm trying to say here is that lithium speculative dollars are spread among quite a few players, some of them with significant market caps that can handle a lot of those dollars. That's not the case for manganese. A manganese craze only needs to be a small percentage of the lithium craze to ignite a similar bullish action on manganese stocks.

My past MN bullish investment thesis has been based on its position as a potential North American supplier (no current manganese production in the US or Canada) as well as the Dahn brotherly connection to Tesla. But the truth is, that stuff doesn't even matter. When you type in "manganese" into Yahoo Finance, MN is the first one that comes up. Just like how LAC is the first thing to come up when typing up "lithium". AMY will undoubtedly benefit from this effect as well, rightly or wrongly, because of its name.  



Just like how people are asking about lithium now, they are eventually going to ask about manganese. Especially if Elon Musk Tweets or farts out something about manganese and doesn't just let his capable technical underlings handle all of it. MN has been slowly trending upwards, but is still way off last year's highs and has generally been underperforming the battery metal market. I don't expect that to last for long and I expect those highs to be challenged. I don't own any EMN, EMM or AMY but I do watch them all and expect them to do well too.

I'm an investor who lives by the buy low, sell high principle. I have sold all of my lithium plays but remain fully invested in MN, expecting a bull run into manganese that is going to be led by this stock. 


Wednesday, 10 November 2021

Why I Think Shorts on Cassava Sciences are going to get Absolutely Crushed

I wrote an article on Seeking Alpha about Cassava Sciences (SAVA), stating that I thought it makes an excellent short squeeze candidate. That article focused more on the quantitative side of a short squeeze. This write up is going to be more on the qualitative side of it. I'll preface this by saying that while I have opened a speculative call option position, this is by no means a "long and strong" call on the stock. It's a startup biotech worth about $3 billion in market cap. I'm not an expert in Alzheimer's disease nor am I in the medical field. I'm in no way qualified to make any quantitative, long-term valuation or price targets on SAVA based on fundamentals and its science. My opinion is solely based on SAVA's float, short interest and the current market sentiment on the stock.

I actually know several of the individuals who are loudly proclaiming SAVA to be a scam, and I would consider myself to be on friendly terms with them. I met some of them previously when they were heavily involved in a short campaign against MiMedx (MDXG). I had initially gone long on the stock but Marc Cohodes took the time to explain in detail his short thesis and had convinced me that the stock had serious issues. I was thankful that he took that time. 

Here's the issue with these short sellers that became very apparent to me when I went deeper with them into the MDXG saga. I have no doubt that they do good research to the best of their ability and have intelligence and market knowledge. The problem is they become obsessed, and obsession has absolutely no place in the investing world. Cohodes made it very clear that he had a personal vendetta against MDXG, as the company representatives (allegedly) made threats against him. He wasn't in it for the money. That's all well and good when someone explains it that way. The rest of them weren't in the same position as him.

Think about the most annoying long term penny stock supporter you know that never shuts up about how their pick is one day going to make them a millionaire. Think about me and how long I talked about PKK in that way since 2014 (it finally happened in 2020-21, yay!). Now multiply that sentiment by -10 and that's exactly what you got with MDXG shorts and that's exactly what they have carried over to SAVA. Have you ever heard that you have to take emotion out of investing to be a success? Well, penny stock pushers with their emotion (blind love) usually don't get anywhere. Short sellers and their emotion (blind hatred) are the mirror image of that.

SAVA is not an investment to these people. It's a scapegoat for rage and indignation. Remi Barbier isn't merely the CEO of SAVA or even a human being. He is the devil incarnate. He is what Joe Biden is to Trump supporters. He is what Trump is to Democrats. He is what Justin Trudeau is to me. If Remi Barbier breathes wrong the obsessed shorts will be all over it like it's the worst thing in the world. But if he cures cancer (or Alzheimer's), they will give him absolutely no credit for it.

The short sellers on SAVA may be smart and good people. The issue is right now they are in an echo chamber. They are in a self-made cult where the end game is seeing Cassava completely destroyed. This is the type of cult-like thinking that churns out ideas like "when will the FDA get some integrity and pull SAVA's trials?". A Journal just confirmed there is no data manipulation in a NINE YEAR OLD publication on SAVA and the response to that was among those same lines. Maybe, just maybe, SAVA isn't the scammer and data manipulator they think it is, given the free pass they have been getting for years by these journals, the FDA and other supposed medical experts and regulators? A Journal having to confirm no manipulation in a nine year old document should probably be a signal to FINALLY admit that there is at least SOME merit to SAVA's science. Not being able to admit this at a base level is akin to not being able to admit Trump lost the 2020 election. It's no longer about facts, but protecting one's own opinions as infallible.

Going back to MDXG, it was supposed to be a zero back in 2018. Yet...three years later and it's trading just fine. It's been bound mostly in the $7 to $14 range since. The MDXG short trade was crowded and I exited it to go onto greener pastures with my limited capital. It was the right move. MDXG hasn't been a great long since 2018 but it's been an absolutely terrible short. 

Here is where the obsessed short sellers and penny stock long dreamers differ. You can hold or baghold a penny stock for years with not too much financial hardship beyond your initial investment and hope one day fortunes turn your way. You can't do that on a short. Shorting is expensive. You have to pay the cost to borrow to short legally. You have time decay on put options if you go that route and want to avoid the possibility of losing greater than 100% by going short on a security. A good short is something that you are in and out in no more than a couple of months. You take your profits and you move on. You don't wait years and years hoping it'll go to zero. Your capital will be eroded away in CTB charges and you will expose yourself to a random 200% up move in a day.

Now how does my opinion relate back to SAVA? SAVA is a meme-ish stock. Short sellers on SAVA are stuck in 2017 back when they had power and influence and haven't left their echo chamber. The good times for short sellers officially died in January of this year when Citron's Andrew Left was absolutely cuckolded by a bunch of Reddit meme traders out of his GME short position. But apparently the SAVA shorters haven't gotten that memo. Those are just dumb retail traders who know nothing of the science to them. Whether they are dumb or not has absolutely no correlation to their past and continued influence on the market. 2021 has been the year of dumb money. A short seller's inability to recognize and respect this...well...you really have to think who the real "dumb money" is?

Short sellers had big profits in August as their citizen's letter to the FDA worked and scared enough people to drop SAVA from $120 to $50. That's when they should have taken their victory lap and gotten out. But ohhhh no. Remember, Remi Barbier is their Joe Biden. They won't be happy until he's completely crushed. These guys loaded up on shorts EVEN MORE throughout October at low prices, likely in preparation of Quintessential Capital's short report. And then the Journal cleared SAVA of any data manipulation and the stock spiked 49% the very next day. Hahaha!

Despite the pullback the last couple of days, SAVA shorts are still in a very bad spot. They heavily shorted at bad prices, lost major on the options market last week and pissed off a bunch of retail traders. Any individual retail trader doesn't pose a threat...unless they tell five of their Reddit/Discord/Stocktwits chat room buddies to buy SAVA because some mean people are shorting it and the potential buyer - not knowing or caring about the science or bear arguments one way or another - agrees. SAVA short sellers are one popular Wallstreetbets Reddit poster away from being completely Melvin Capitalized. Some guy hacks Elon Musk's Twitter account to type out "Use Cassava" in a Tweet and the short sellers are completely smoked. It's not sound investing. It's emotional gambling and my bet is that it will fail for them, causing a short squeeze as a result. And it very likely won't have anything to do with Cassava's operational achievements, for better or for worse.

P.S. Gabriel Grego, the man behind Quintessential Capital, is not one of these individuals. I find him to be more of an opportunist than an emotional investor, which in some ways serves him well. My first encounter with him was with his article exposing Aphria. I didn't like the way he conducted himself. He raised some valid points but made mountains out of molehills. Now that Aphria got bought out he took credit for the firm forcing itself to clean up and thus became buyout ready. LOL sure. I don't care for this guy nor do I trust his research. But he is a substantial market player in this. Allegedly he covered his short position the same day the report went out. Real great conviction there. But at least he wasn't married to the short position, unlike the others.

Wednesday, 6 October 2021

Doing A Deep Dive On The Deep Dive's Dishonesty

https://thedeepdive.ca/ is a site that built a reputation and a following years ago as one of the few out there willing to do detailed financial and other critical analysis of Canadian penny stocks. This is a valuable endeavour as a lot of coverage on Canadian small caps are promotional or long-biased in nature and often distort or ignore bad news or caveats that may be buried in SEDAR filings.

Unfortunately, over the years The Deep Dive has degenerated to the point where most of the blog posts on there are complete wastes of time to read, all wonderfully dis-organized into a massively cluttered mess of a website. I suppose, just like news outlets such as CNN, the site struggled to find a way to monetize its content and concluded that low quality SEO clickbait articles was the best route to go. There's nothing wrong with trying to earn a living, but poisoning the "Deep Dive" brand is a bit of a bait and switch if most of the articles on there are fluff. May I suggest that the site changes itself to "The Shallow Pump" instead? theshallowpump.ca is still available on GoDaddy.

(As an aside, when you become an ACTUAL SUCCESSFUL investor, you don't need the few dollars generated from web traffic to support you, *wink wink* - successful analysis and successful investing should eventually go hand in hand.)

As a result of The Deep Dive's steep decline in quality, I just stopped following the Twitter account and stopped reading their content. Their Twitter account still follows me - we shall see how long that lasts - and they have far more followers than I do, along with some followers who I follow and respect. So The Deep Dive brand still has credibility in the Canadian microcap space.