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.

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