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Wednesday, 18 March 2015

Penny Stock In Red - Down and Hurt

(Case study, no real case involved)

Bursa queried the counter/slapped with UMA. The company replied in its response - 'Not aware of any corporate development or explanation that could give rise to the unusual trading activities.'

Bursa further exercise caution to give further warning. Traders and punters not listening.
Till a big Investment Bank impose cash upfront for this counter and it went South. Other brokers follow suit.

What went wrong?

Let me share some info on am example trading of a speculative counter.

For a share price around RM0.10, market capitalization let's say RM 40m +-.  To control the shares, the so called caretakers will Corner the stock till 80% at least and 90% best case. An additional RM 10m bullet with 3x credit limit on cash collateral gives you about RM30m credit line (in some cases you may get 4x of cash collateral).

With 90% of the stocks Fully Cornered and additional RM 30m credit line on hand, you may buy the shares all the way up with less obstacles. When you reaches let's say 40 cents from 0.10 (price you accumulated the shares), it reaches a market capitalization of RM 160m (yes, your money has grown 4x). When broking house stops the credit limit, you may not be able to roll further once your stock hits T3 and T4.

So what do you do?
T4 at 4pm comes, FORCE SELLING WITHOUT LIMIT TO BUY BACK.

Think again, what was the initial cost invested? Yes, 10 cents.

Disclaimer and Declaration

The full content of the article is for educational purposes only and should not be used as investment recommendations. We are not responsible for all investment activities conducted by the participants and cannot be held liable for any investment loss. Examples of specific shares may be citied for illustration purposes.

Regards,

Humble Pie








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