copyright by The Bettina Network, inc. 2010
A summary of this breakfast’s stock market conversation is only for the strong of heart.
We had a guest who was celebrating wildly at breakfast. He owns 1 million shares of a little stock called EKWX. To find it we had to go to http://investorshub.advfn.com/, an information web site for people who spend $50 and buy a few million shares of stock (I hope you realize that is an exaggeration).
This is a stock which sat dormant for several years at about .0006/share and since March 31, 2010 has gone to .002/share. Figure out that profit if you owned the 1,000,000 shares. There is no information on the company I could find. The guest knew nothing, he was totally into his euphoria over his great luck and he was going home to buy more.
Going to Investors Hub,—- when their site opened, on the landing page on the left hand side was a list of the 15 stocks with the most comments, which were left by those who regularly follow what happens on investors hub and at the top of the list was EKWX. Much of what we read was about conjectures that this was going to be a reverse merger where EKWX is a publicly traded shell, probably merging with a private company and the activity comes about because, as you know, news leaks, only we aren’t on the top of the list to get the leaks.
EKWX traded almost a billion shares today and has gone up some 350% since 3/31/2010.
We are going to follow this guest and his stock tradings. We asked him to write a blog for Bettina’s, but he spends his days watching the stocks he buys and sells and doesn’t write.
He danced around the breakfast table all morning, trying to stay sane until the stock market opened and he could watch his stock – which he did, all day. We would have danced with him if we owned any of EKWX, but since we don’t we just drank an extra cup of coffee.
If the stock goes to $1, he becomes an instant millionaire.
This has better odds than the lottery, at least you get to keep some of your money if what you expect doesn’t happen.
The blogs are hot with this stock and the conjecture on most of this is that EKWX – a public shell – is in the process of becoming a Reverse Merger. Which is what is causing all the furor.
What is a Reverse Merger with a Public Shell?
“A Reverse Merger is a transaction where by the private company shareholders may gain control of a public company by merging it in with their private company. The private company shareholders receive a substantial majority of the shares of the public company (normally 85% to 90% or more) and the control of the board of directors. The transaction can be accomplished in as little as two weeks, resulting in the private company becoming a public company. The transaction does not go through a review process with state and federal regulators because the public company has already completed the process. The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing the public shell company issues a substantial majority of its shares and the board control to the shareholders of the private company. The private company shareholders pay for the shell and contribute their private company shares to the shell company and the private company is now public.
Upon completion of the reverse merger, the name of the shell company is usually changed to the name of the private company. If the shell company has a trading symbol it is changed to reflect the name change. An information statement, called an 8-K, must be filed within 4 days of the closing. The 8-K describes the newly combined company, stock issued, information of new officers and directors, a full description of the business, and financial statements audited to US GAAP standards. The 8-K must disclose the same type of information that it would be required to provide in registering a class of securities under the Securities Exchange Act of 1934.
(See Sec Final Rule 33-8587, pdf file)
If the shell company is listed on the Bulletin board, the registered or “free trade” shares can continue to trade. The company can do a private placement immediately. To trade new shares offered by the public the newly combined public company must first register the shares with the SEC. This process takes three to four months and normally requires filing a Registration statement with the SEC under Reg. SB-2 or SB-1.
If the shell company does not have a symbol, an application for a symbol is usually made to the NASDAQ Bulletin Board. The application for a symbol requires filing a Form 211 by a market maker that is a member of the NASD. The Bulletin Board has no financial requirements. A listing will be granted if the affairs of the company are in order and the company answers the questions posed by NASDAQ.”
ED: NOTE; THIS WAS COPIED FROM THE Investors Hub Web site to give you an idea of what this kind of trading is like and how and where to find information when you are off the big board and onto the sub-penny stocks. We hope they don’t mind.
Of course, another possibility is that this is what is called a “pump and dump”, something which happens on these boards. Someone starts buying a stock to get your attention, little by little others jump on the band wagon seeing the action and when the stock has moved up a bit, the original person sells all of his stock and runs to the bank with the money, leaving a lot of folks holding the “bag”. Only generally, the stocks don’t go this high this fast with a pump and dump operation going.
Wheee! Isn’t this fun? It actually would be if we had money invested in EKWX at .0006. This way, as observers, it is a learning experience and especially learning how to contain our jealousy of someone who has that 1 million shares.
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