Oh, Facebook coming up, Youtube coming up and let's see if Twitch is going to come up. Also, as soon as you guys get logged in, just give me a shout. What we're going to talk about today are the importance of understanding how secondary offerings work and private placements. This is going to be based on something that happened today, but months from now, even years from now.

This is still a great topic because understanding secondary offerings and private placements is going to be important for your long-term success as a trader. So our example today is on Naov. This is a stock that as many of you know, I traded this morning and I did fairly well on it. I'll log into my account so you guys can see for those that maybe haven't watched my morning show from this morning.

So there's my P. L from today. So I finished up 18 843.73 cents with 15 000 of it on Naov. So there's obviously a strategy for trading these types of stocks now.

I was trading it as it was moving up this morning and then, uh, as it came back down, I stopped trading it. And what ended up happening in the afternoon right around 1 Pm. There's a breaking news headline here. Um, where the company announced a 6 million private placement and it almost immediately plummeted from at that point a dollar fifty which was already selling off a little bit, but not too bad all the way back down.

Now to a Dollar Eight. So this is a stock that literally went up over 200 percent in one day. Yesterday it was priced at 67 cents. It goes up to 3.2 dollars and 34 cents and then comes all the way back down.

Dollar Eight? That's crazy, right? That seems nuts. I mean, it happens. Volatility in the small cap market happens quite a lot, but this is a pretty extreme move. and it's not one that we love to see.

so I think it's a good opportunity for us to talk about it. And that's we're going to do in this live stream. So those of you tuning in live hit the thumbs up. I'm going to play the intro here and then we're going to jump in.

Start talking about secondary offerings and private placements. All right, Thank you guys for tuning in. So here's the deal. When a company does an initial public offering, what they're doing, as you probably already know, is they're selling shares onto the open market.

So if a company wants to raise a hundred million dollars in their ipo, they could choose to sell for instance, 10 million shares at 10 a share. And just like that, through their 10 their 10 million share ipo, they'll raise 100 million dollars from that point forward. Hey Kevin, how you doing There will be 10 million shares available to trade. That's what we call the float.

It's the number of shares available. Now each morning when I'm doing my my breakdown, I'll just log in here. for one second you'll see I'm of course looking closely at my scanners and what I'm looking for are stocks that are gapping up which Naov was and generally have some type of catalyst. a good news headline which this had and I typically like to trade stocks with floats of less than about 25 30 million shares.

And that's because the lower the supply, the greater the imbalance can be between supply and demand. Therefore, the bigger moves we can have and a stock that we'll talk about a little bit today as well will be a Pvo, A stock that uh, has literally gone from less than eight dollars all the way up to sixty dollars a share. and today pulled back but or was pulling back, but today actually popped up to 52.. So you know this is what we look for.

Apvo is a stock that has a lower float, had a huge imbalance between supply and demand, and Boom a massive move. But let's go back to Naov. So Neov this morning was on our Gap scanners. So these Gap scanners are live streaming and you have access to them as a warrior starter or a warrior pro student.

You can just click on the scanners right here and you can pull it up and you'll see that Naov right Here was our second leading Gapper in the entire Us market, right behind V I V E. Now V I V E was actually a secondary, sorry, a reverse split. We'll talk about this, uh, in conjunction with the conversation on secondary offerings. But as a result, Uh, Viv wasn't really a true gapper And so therefore, the true leading gap in the entire Us market today was Naov gapping up 152 on and with a total volume of 177 million shares, so this was trading on heavy volume.

There was a lot of opportunity here, certainly to make money, both going up and as it turns out, coming back down. So this morning, um, I traded it. Uh, my big trade on it was actually, uh, right here along a dollar seventy three, adding to a dollar ninety five, adding it to and then taking profit into this squeeze. Here, It was a very nice trade, but what I didn't know was that they would do a direct offering or a, um, a private placement later in the day.

Okay, so let's back up for one second: Make sure we're all on the same page so we understand what initial public offering is, right? Any question about ipos, those of you on Twitch, those of you on Facebook, Youtube, any questions? or do we all understand an ipo? All right. So we understand an ipo. initial public offering? Well, what happens? Let's say, five years after the ipo, the company needs more money. They need more money.

Let's say, uh, you know, Pharmaceutical Biotech Company, for instance, has an independent study that finds significant benefits provided by their new device. But They need more money. to be able to build out you know that device or continue testing or whatever the case is. So if they need more money, what they can do if they want to is a secondary offering.

So the initial offering is the first public offering. It's the initial public offering and anything after that is considered a secondary offering, and even very large companies. Even a company as large as Tesla can decide to do a secondary offering to raise more money to reinvest in the company. Now, a shareholder generally isn't going to love a secondary offering, because what that means is that you're selling more shares onto the market to raise money.

And that kind of dilutes the value of the stock, right? You're selling more shares at maybe the same price. It's bringing the value down, so it is a form of dilution. However, you know, if it's positioned well by management of the company, it can be certainly considered that, hey, this is good for the company. We're getting this extra money from investors.

We're going to reinvest it. It's going to allow us to do this, that and the other thing. And so sometimes even after a secondary offering, you will see a stock, uh, hold its levels or even go higher. That wasn't the case here with Naov, but Naov this morning had a float of 4 million shares.

4 million shares available to trade. Now if we look at this um, the detail of this private placement, they've raised six million dollars by selling 8.5 million shares at a price of 70 cents. Okay, so now wait a second. If you're a shareholder and you own the stock of the dollar, you know you kind of feel like what they just sold another 8 million shares to someone at 70 cents that doesn't feel so good.

Now if they sold that 8 million shares at two dollars, that shareholder in at a dollar would feel great. But because of the low price the price has a big you know is a big factor here in in how the market receives the news. And so unfortunately in this case this is a very large offering. Uh relative to the outstanding float.

it raises six million dollars for the company, which is only a little bit less than I've made this year day trading. So uh, burn and it's at 70 cents a share. So you know this is kind of not great news and as a result, the stock uh has come down quite a bit. Now What may happen over the course of weeks and and months potentially is that the stock will continue to go lower and lower and lower and lower.

And so if we go back to uh, was it Ap uh, no, Ap Ap Vo. Let's look at Apvo. So see on the Apvo chart this little s right here that tells us that the stock did a split and the question there, uh, flow, why would they sell it at 70 cents, not two dollars? Well remember someone who's who's gonna buy 8.5 million shares. Six million dollars of this stock at two dollars a share.

You know, the only person that would buy it at two dollars a share, which is 200 percent higher than it was trading the other day is someone who really, really believed this stock is going to go back to all-time highs. But most investors want to feel like they're getting a good deal, so they probably said listen, we'll give you six million dollars, but we're not going to pay a dollar fifty a share. You know we'll We'll do it for 70 cents And you know these are all structured differently So I don't want to like super analyze this specific company because the details. You know, some of it is a little over, uh, deeper than we need to go.

But let's just talk in general, when they've done these types of offerings, you know what the investor wants to know. They want to know that they can get their money back out pretty easily if they need to. And so they want a good price, you know they're like, yeah, I'll give you 10 million dollars, but I want those shares at a good price. That way if I need to sell them on the open market, even if the stock does drop a little bit, I have some room to get out of the you know position.

now. Different types of offerings are structured differently which can limit their the resale of the shares. but let's not get into that for right now. So what can happen over a period of time has happened with Apvo is that you know they they come out with news.

You know the stock squeezes up and then they do a secondary offering. The stock goes down. It starts fading lower and lower and lower and lower. until eventually it's below a dollar a share.

Now that's a problem because the listing requirements to be listed on the Nasdaq, uh, and New York Stock Exchange, you need to maintain a stock price of one dollar a share. Otherwise you get de-listed you get a de-listing notice. You get an opportunity to get your stock above a dollar. If you can't do it, you get de-listed and you get kicked.

Boom off. Uh, off the exchange, you get knocked down to the Otc market, over the counter market which is where uh, obviously, uh, the Pink Sheets and penny stocks trade The kind of like you know, not as not as regulated stocks. there's less, uh, requirements. Stocks can be in bankruptcy and things like that.

So there's this mechanism that companies will use to get their stock that's maybe 10 cents or 20 cents back above a dollar. And it's called a reverse split. So just like, uh, Apple did, a stock split from 700 down to 100. a seven to one split just like Tesla stock split.

Apvo is doing a stock split, but instead of dropping the price lower, they're actually making the price go higher. So a 14 to one stock split. In this case, if the stock had been trading at 10 cents, then the next day it's trading at a 1.40 And so let's say you were holding 14 000 shares at 10 cents. You log in the next day and you're like Holy smokes, I'm retiring.

The stock's at a dollar 40. This is awesome. Now that may not be enough to retire on. But let's just say, and then you realize, wait a second.

I'm not holding ten thousand shares anymore. I'm only holding a thousand shares and I was in it Fourteen cents. And it says my cost basis is a dollar Forty. So it's it's a trade, It's an exchange.

And so so what happens is the stock price goes up and the shares or the float go down. So when you have reverse splits here, let me see. Let me see. Let me see.

So when you have reverse splits, what happens is the stock price goes down and when you have traditional splits, what happens is the stock price goes. Um, sorry. When you have a reverse split, the stock price goes up and when you have a traditional split, the stock price goes down. There you go go.

All right. So that was the case with Apvo. They did a reverse split, the price got back above a dollar, the float dropped, and all of a sudden a little while later they start coming out with some good news. And all of a sudden, now with this imbalance between supply and demand, you have this huge move and the stock goes from eight dollars all the way up to 60 and is still holding that level.

So if you're a trader thinking boy, anytime I see a stock like this pop up, I guess I should just short it if it's up 200 because they're probably going to do an offering. Well, just look at that Apvo chart. Don't be so quick to go short on these because some of them will keep going higher and higher and higher. So uh.

I'm getting a little distracted by my little kid out in the in the back. Um, so he's shushing. He's shushing. He's shushing you.

He's pushing you. so. so let's see. Um, so we've got.

He's really cool. What's going on back there? What's going on? Uh, all right. So we've got Apvo. We've got the reverse split here.

Oh right. So let's look at your what? Yeah, just just really short. Just really short. You want to watch.

You want to watch some paw patrol. No, the old paw patrol. You know. Our man.

Our man Marshall. Yeah, yeah, you got. you've got some paw patrol? right there. Yeah, I mean, that's what I would do if I were you.

If I was in your shoes, I'd be. I'd be watching some paw patrol right now. That's what I would do. Okay, it's gone all right.

Let's get back to it. Okay, we gotta roll. So uh, no, no, I'm not doing a video. I'm just sitting here looking this way.

mostly. This way, you tell me about paw patrol, tell me what's going on over there. So no, no, I can't. I could possibly.

we got to finish this video here. I'll tell you what, I'll tell you what, we'll put it up. We'll put it on this computer. Hang on.

Hang on everyone. Hold everyone. Hold your horses. One second you got you got a thousand people.

Uh. hanging tight here. Bud. All right You wanna You wanna listen? You wanna listen to Paw Patrol? Do you listen on the headphones? Yeah, Let's just see here.

I'll I'll press play. Do you hear what is he saying? Are you kidding me? All right. We got him going. Um.

so so I lost my train of thought there for one second. So um, if you think so, back to Naob. So if you took the perspective that every time a stock pops up, I'm just going to short it, it's probably going to fade back down. That's not going to work super well, because although secondary offerings happen from time to time, they're not every single day on every stock that pops up and you will have some like Ap Vo that go higher.

and so in fact, early short sellers who short these moves thinking that they're just going to fade. These are the ones that get squeezed out the hardest, so just be mindful of that. But there's a couple things you can do. if you go onto this website called Bam Sec.

you can actually see whether or not the company has filed what's called an S3. So an S3 is a shelf registration which gives them the right to sell shares onto the open market. And the fact is, a lot of stocks, a lot of companies have an active S3, So the S3 is, um, you go to Bam Sec, you type in the ticker, naov, oops, sorry N-a-n-a-o-v right here and then you can go down to Prospectus and uh, uh, Prospect Buses and registrations down here and then go down to S3. And this shows us the S3, which is good for two years.

So this tells us they have the right to sell up to 35 million dollars. Uh, in secondary offerings. Now that's not. That's not uncommon.

A lot of these small cap companies have shelf registrations because it gives them the opportunity if they want to to raise money. I mean, it's it's it's. not surprising. So just because a company has this, does not mean that it's a guarantee that you're going to see an offering tomorrow or the next day.

And in the case of this stock ears, this is another another one. They just did another offering. Now this one is a little bit different. The six million dollar offering was private placement on Naov, meaning an investor came in and said, yeah, I'll give you six million dollars for this many shares and it's a private deal.

This is an offering priced at the market. which means through a through an underwriter, they actually sold shares right onto the market as the stock most likely was dropping down. So that's a direct price to the at the market type of offering. And so because they did that during regular trading, the price was at four up dollars Price at four dollars? Really? Yeah, you can come up a price at four dollars.

Really isn't all that bad here. We got pop, We got our man, our man P. Diddy right here. paw patrol.

So again, in the case of this one, the price at four, I'm not gonna, I guess have time to go into as much detail as I wanted, but the cycle of companies doing secondary offerings and then doing reverse splits. It's a cycle that we see happen again and again and again. Uh, especially on lower priced stocks. So it's not uncommon.

but at the same time taking the approach of just shorting every single stock, that, oops, yeah, keep that one on. That's not going to work super well. You've got to trade them with a strategy, so there's certainly a strategy for trading these to the long side. Yeah, Paw Patrol's right here.

and there's a strategy for training those to the short side. In terms of trying to go short on any of these. My approach would be to wait for the actual news to come out because if you try to short these anticipating that they're going to drop, you could end up holding them and hoping as it squeezes so my computer's been commandeered. Uh, I've lost complete control of the situation here.

Yeah, this is my. this is my little boy, my big boy. You guys, you guys are our students. You you know about all this stuff? Um, but yeah.

the So if you look at some companies, some stocks like some of the shipping stocks you were. We were seeing this history of, um, the stocks putting out putting up. You want another snack, putting out secondary offerings and then putting out a great news headline. All of a sudden, the stock goes up 100 and then they do another secondary offering and then there's a series of reverse splits and it becomes this cycle of reverse split secondary offering.

Reverse Split secondary offering. You know, really exciting news headline. but then it doesn't end up. Um, you know, giving a sustained long-term move and then and that it was happening in a certain sector, specifically in the shipping sector.

But then you know you also see some of these stocks like Ap, Apvo, and a few others that just go totally crazy. And so again, my approach on these is there's opportunity to trade them both long and short to the long side. You trade while the momentum is going up to the short side. I wait for the confirmation either of the break and trend, which in the case of Naov, you can see we broke trend actually right right around here when we broke back below the volume weight, average price.

So in this case you know you could have traded to the short side for a little while. I don't know how long you would have wanted to hold it because as always exposure time is a risk. Whether you're long or short, the longer you're in the market, you know the higher the likelihood that you could get yourself in a situation where all of a sudden you're caught by surprise move, surprise news and it's it's a problem. So anyways, it's something you got to be mindful of and this is a good a reminder also for beginner traders not to hold and hope not to buy something up here.

it drops down and then hope that it comes back because some of them will never come back. And a reminder for short sellers: you want Apple juice? Are you sure you don't want any of my You don't want any of my greens? Yeah no. this is green. This is really healthy greens.

It's kind of like it's like lettuce. It's like lettuce in a cup and you have to chew it all right. Well, it looks like we're going out to get some juice. Time for apples.

All right. I'm gonna let you guys go. I hope you. I hope you enjoyed uh and learned something I don't know.

Things went off the rails pretty quick here tonight so I'll see you guys the next episode. I'll be back at it first thing tomorrow morning. Live streaming at 8 30 8 45 Our watch list. Oh we gotta get chocolate milk.

We gotta get chocolate milk. I gotta go. This is getting serious. All right, I'll see you guys in the.