Hottest Penny Stocks – Part II
Hot Penny Stocks to Watch
Disclaimer
Stock speculation is very risky
Do not trade with more than you can afford to lose.
Seek professional investment advice.
This is not investment advice.
No warranties, you are on your own.
This is not suitable for all investors
Penny Stocks to Watch
My favorite type of penny stocks to watch are the public shells that can be used for reverse mergers
A reverse merger is when a private operating company is acquired by a shell (non-operating) public comapany.
This is done so the private company can go public fast.
Reverse Merger Price Jumps
With the merger, the shell may go from a small market value to a large market value in a few months
For example, the shell may have a market value of from $100,000 to $500,000
The shell shareholders get to keep usually 5-20% of the new merged company
The merged company may be worth millions
Hypothetical Jump in Value
Do the math, if the shell was worth $100,000
The operating company is worth $10 million
Then the value of the merged company should be more than $10 million
So if the shell shareholders keep 5% of the total new, merged company, they have stock worth $500,000 or five times their original investment
Reverse Merger Example (chart courtesy of Stockcharts.com)
RMDM
RMDM was a speculative, sub-penny stock that took off after a reverse merger
Huge profits were made by the original holders
Note that it went right back down again For more such stocks see my YouTube video “Hottest Penny Stocks Part I�
RISKY!
While large gains can be made by sophisticated players in these stocks, they are very risky
Most OTC shells will not merge in a given year
They have little or no public information and what is there may be incomplete, misleading or even deliberately false.
Merger stocks tend to rise and fall FAST!
Never risk a lot of money in them
Where to find them
Reverse merger shells are found in the Pink Sheets and on the OTC Bulletin Board
Pink Sheet shells may not be providing public information
There is no subsitute here for educated, tedious research
Experience and knowledge can pay large dividends here – ignorance is expensive
Learn More
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How to Pick Hot Reverse Merger Penny Stocks
John Lux
Trader, investment banker, former OTC Market Maker and attorney Lux.Investor@ gmail.com
Copyright ŠJohn Lux 2011