MBAH Friday Market Recap
The price kept going up during the day and closed strong. Placing a reasonable valuation of the stock may be tricky, but the key point first is MBAH was coming off of an acutely low 52 week bottom relative to its quite recent price. The company has not been a PR pumping outfit, so the stock probably flew under everyones' radars for so long that any remaining shareholders in it finally dumped during the decline.
Technically speaking, a correction was certainly in order. When I saw this stock just 3 days ago, I realized I was looking at a classic hard core sub-penny trend reversal capable of massive percentage gains. MBAH really struck me as inherently undervalued which in turn would support the sustained interest necessary for a rally. They do report revenues. The balance sheet is imperfect, but they remain viable. The PR did communicate what may have been possible to substantiate independently via DD, i.e. that they are capable of achieving even broader exposure for their insurance products in the near future through the distribution channel of a major US insurance company. I'm not swearing on a stack of bibles this is the greatest company in the world, but that there is definitely some substance to work with which is significant unto itself.
Many sub-pennies have dwelled in their basements for long periods of time. Here was an active company that had not previously issued much in the way PRs and had perhaps dwindled due to sheer obscurity. Seeing their existing revenue stream may grow now combined with the very recent prices of 0.15+ in 2004 and a 52 week high of 0.28 made it look extremely undervalued to me. It may even have a true valuation of 0.10-0.20, but with forward looking potential, the market may assign an even higher value. So I saw this had the markings of an undiscovered gem capable of really moving and it would not linger below one cent but for a brief moment in time.
The action on MBAH's stock shows a number of possible aspects in play:
It is certainly a momentum play now, so you can take it for granted that the massive volume (3x float today) almost guarantees active trading next week. Weekend researchers viewing volume and price gain lists and board posters will practically ensure every OTC trader and investor knows of MBAH by Monday Due to the reasons cited above, many will realize the continued potential for a stupendous rally is still intact with MBAH.
I believe the low float plus a surge in buying interest by early adopters and quick follow ups by percentage gain chasers may have surprised some key MMs with the strength of the move. Some MMs may have even expected a move, but were not necessarily prepared for the velocity of it.
When I started buying at 0.0065, one of the other primary indicators that excited me was that the Bid/Ask was populated by NITE, SCHB, HILL and BAMM, heavyweight MMs. This indicated (to me at least) they may be ready for some action. They would fill my orders, but only after five minute pauses. They were gauging the situation having already pegged this stock for a runner. But they were hedging on their fills and took some time executing orders before they let it move to 0.07, then 0.074 & 0.078. By that point they started to let go and buying really kept pouring in. After a couple of days of approx. 9M volume, the buying today took off on the gap up from yesterday's strong close.
Those factors I identified as the perfect rally ingredients in MBAH may or may not have been as fully appraised by the MMs, but with the float as low as it is the MMs I mentioned were most likely already gearing up for having a nice profitable rally with MBAH. Then buying pressure increased and other smaller MMs starting playing the bid & ask. This is what sometimes trips up the bigger MMs who may try to control a stock and smaller MMs work independent of any coordinated MM influence. If they at all oversold shares not in their inventory, then the other MMs can actually push the situation out of the bigger ones' hands by making the market and pocketing the spread as the stock rises. Then it was game on and the ensuing results we saw today.
It is open to speculation whether MMs actually cover their oversold positions (and they do oversell, that's a fact Jack) within the mandated 3 day settlement period. If they do, then you have a short squeeze and you will see them shake this like a yo-yo Monday through Wednesday. If they do try to tank it and buying pressure facilitated by other MMs crushes such efforts, the squeeze can be severe if they have not already covered. If they choose to wait longer to cover their positions, they'll probably let it run to the moon first then try to bring it down harder on the retrace if they can. But we all know that is a calculated risk they'll have to decide on since MBAH was so intrinsically undervalued coming off of its 52 week low that it may be hard to bring it back down anywhere near the several penny level again once it breaks .15-.20 and beyond.
Based on my call to TA and the share count figures provided above, you may rightly assume the recent issuance of shares would mean either:
1. The company knows it was undervalued and expects improvements in their business will sustain much higher prices soon so they wanted to make sure shares were in the coffers to sell into the market. This is not a negative relative to the share count if they do succeed in selling at anywhere from 0.10 to 1.00 since that could provide capital financing (if it goes to the company's bottom line) without taking on toxic financing arrangements.
2. The more cynical assumption was they will profit personally from selling those shares after releasing a PR when the stock was due for a rebound.
3. A combination of both 1. & 2. above.
4. Importantly, it added liquidity to the stock subsequently allowing the market cap to achieve a better valuation. They say they had a miniscule OS before of around 2M. After seeing the stock tank to nothing, it would be necessary to protect the company from a dime store buyout by increasing their share count and market cap. This makes perfect business sense. The current authorized share issuable is still only 80M, so dilution is not even a negative for shareholders now and was probably an absolute necessity for the company's survival. It is still low and the market cap at 0.0065 was still a ridiculous $233,303. After the 0.06 close today, it is still a tiny $2,153,571. Peanuts. So other investors will see this and if they think the company has any potential at all, they will think the market cap could and probably should be many times higher than it is now. We know this and the company knew this, so it was good they increased their still small outstanding share count (and low float with about 50% apparently held by insiders) and particularly because it allows for the liquidity and volume we are seeing. Volume is presently a MBAH shareholder's friend and a trader's dream, so you can expect more action here.
5. Even if they already sold or will sell the recent 10M shares into the market it is still a low float with a tiny market cap. That 10M was not or will not be a factor with this kind of buying interest and volume.
It should be very exciting next week.