The SEC recently change a rule regarding reverse stock splits restricts companies from using a "1 for 200" reverse stock split to regain compliance with minimum share price requirements on exchanges like Nasdaq and NYSE. This also means a company cannot perform a multiple reverse splits where they consolidate 200 shares into 1 share combined in a two year period. Pretty nifty.
So if a company reverse splits 150:1 then can’t do another reverse split higher than 1.33:1 in the next two years.
I had a hunch this was going to muck up some hedge funds and require their go-to strategy, which was “just be a dick” to change. This post is related if you missed it. It is not edited so I am sure there are funny typos.
So I wrote some code and then Shaun lectured me about writing code and then we got out a white-board and then Shaun wrote some new code to pin down stocks that were trading in a manner that we hypothesized would precede a big move. This all took about a month.
Remember, science is falsifiable unlike economics and backtesting is useless so we threw our own money into the market to test.
So far we have found two: Enveric Biosciences and BioXcel Therapeutics. We bought BTAI last Wednesday/Thursday, then added on Friday post the initial move and closed today blind.
Blind meaning we had the ask sat and slept in. And then went hiking. ENVB did well as well but that was last week. Two for two is not conclusive of course but it’s a good start.
Both PEPG and BTAI were covered in our micro-cap round up post as well. PEPG made 400% too but for a different reason.
We will be adding this code into the backend and will continue to work through these trades in Chat as we find them.
I have no idea if the hedges behavior will remain consistent or if the current action is just for the stocks they need to clear their side pocket accounts or not but it is, for now, something code can spot. Double nifty.
The fun thing about the market. It always changes the game slightly and sometimes in your favor.
PEPG is still a play for us. As of now we are done with ENVB and BTAI. This might change of BTAI if the offering is shown to have gone private.
— AJ
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