Uplisting Power

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Includes: UNIR
by: Sergio Heiber

Summary

Stocks that uplist tend to experience an upside spike exceeding 25%.

The upside spike may not be sustained as the stock price becomes more reflective of the underlying fundamentals.

Not all OTC stocks rumored to be uplisting candidates are eligible for uplisting.

I was curious about the impact on stock price for an OTC stock that obtains a listing in one of the three major U.S. stock exchanges. I couldn't find any statistical information so I created my own analyses. This article is what I found about the OTC uplist process.

There are many companies that indicate that they will be applying for a listing but are far from eligible. This means that it is a perceived upgrade to be listed. Sure enough, there are stricter requirements for a listing, including SEC reporting and a listed company is generally considered a stronger company that an OTC stock. Additionally, many funds are prohibited by their own definition from buying OTC stocks. Obtaining a listing, therefore provides a greater pool of potential investors and greater liquidity as well as reducing the bid and ask spread.

OTC, or over the counter stocks, trade in a decentralized market not subject to reporting requirements as are listed stocks and offer less transparency. OTC stocks that are approved for a listing are called Jumpers.

NYSE listing requirements include a minimum price of $4 per share, 1.1 million shares outstanding with a market value of public shares in excess of $40 million, and a minimum of 400 round lot shareholders.

NASDAQ listing requirements include a minimum bid price of $4 per share, 1 million shares outstanding, at least 3 market makers, and a minimum of 300 round lot shareholders.

AMEX listing requirements must meet one of the following:

  1. Have a pre-tax income in the most recent fiscal year or in two of the prior three fiscal years in excess of $750,000, a market value of the public float in excess of $3 million, a minimum stock price of $3, and total shareholders' equity in excess of $4 million.
  2. Have a market value of the public float in excess of $15 million, a minimum stock price of $3, two years of operating history, and total shareholders' equity in excess of $4 million.
  3. Have a total market capitalization in excess of $50 million, a market value of the public float in excess of $15 million, a minimum stock price of $2, and total shareholders' equity in excess of $4 million. The company must also meet a minimum number of round lot shareholders relative to the number of shares available in the public float.

For this study, I used stocks that were uplisted from OTC to one of the three major exchanges during the first three quarter of 2015. What I looked for was a spike in price prior to uplisting and ignored the overall trend if there was a spike on announcing application for listing. Then I looked at the spike in price on uplist and measured the spike in price over the subsequent short term. Finally, I looked at the current stock price, which is at least two quarters subsequent to the uplisting.

First quarter 2015 OTC uplisted stocks:

STOCK SYMBOL UPLIST DATE NEW EXCH TREND PRIOR ON UPLIST TREND AFTER
CPS 1-15-15 NAZ UP 30% GAIN NEW LOW
VUZI 1-28-15 NAZ UP 30% GAIN NEW HIGH
VNRX 2-6-15 NYSE 100% GAIN FLAT FLAT
NSAT 2-10-15 NYSE FLAT 10% GAIN NEW LOW
NHTC 2-17-15 NAZ UP FLAT NEW HIGH
LBIO 2-26-15 NAZ FLAT 100% GAIN NEW LOW
OCAT 2-26-15 NAZ FLAT FLAT NEW LOW
CTRV 2-27-15 NAZ UP UP DOWN
NHLD 3-3-15 NAZ DOWN FLAT NEW LOW
SLTD 3-4-15 NAZ DOWN 30% GAIN BACK TO UPLIST PRICE
CAPR 3-9-15 NAZ DOWN 100% GAIN NEW LOW

Second quarter 2015 uplisted stocks:

STOCK

SYMBOL

UPLIST DATE NEW EXCH TREND PRIOR ON UPLIST TREND AFTER
ESES 4-10-15 NAZ FLAT FLAT NEW LOW
CRBP 4-16-15 NAZ DOWN 100% GAIN NEW LOW
NVIV 4-17-15 NAZ UP 100% GAIN NEW LOW
RELY 4-21-15 NAZ UP 50% GAIN NEW LOW
STKS 5-8-15 NAZ FLAT FLAT NEW LOW
GLPG 5-14-15 NAZ UP 30% GAIN FLAT
ONCS 5-29-15 NAZ DOWN 30% GAIN NEW LOW
MLSS 6-1-15 NAZ UP 30% GAIN NEW LOW
AYA 6-8-15 NAZ FLAT FLAT DOWN
CYNA 6-18-15 NAZ FLAT 25% GAIN BACK TO UPLIST PRICE
CETX 6-25-15 NAZ UP FLAT DOWN
BPMX 6-25-15 NYSE FLAT 25% GAIN DOWN
CXRX 6-29-15 NAZ UP FLAT DOWN
PIRS 6-30-15 NAZ FLAT 25% GAIN NEW LOW

Third quarter 2015 uplisted stocks:

STOCK SYMBOL UPLIST DATE NEW EXCH TREND PRIOR ON UPLIST TREND AFTER
PGLC 7-6-15 NAZ UP NEW LOW NEW LOW
CUBN 7-7-15 NAZ UP FLAT FLAT
SXCL 7-7-15 NAZ DOWN FLAT NEW LOW
ITUS 7-10-15 NAZ UP 100% GAIN BACK TO UPLIST PRICE
AEMD 7-13-15 NAZ DOWN 50% GAIN NEW LOW
RILY 7-16-15 NAZ UP FLAT FLAT
FCFP 7-17-15 NAZ UP UP NEW HIGH
CYRX 7-24-15 NAZ UP DOWN NEW LOW
EYEG 7-31-15 NAZ FLAT 300% GAIN BACK TO UPLIST PRICE
XELB 7-31-15 NAZ FLAT DOWN NEW LOW
SITO 8-10-15 NAZ UP 25% GAIN BACK TO UPLIST PRICE
PYDS 8-11-15 NAZ UP 25% GAIN DOWN
BNTC 8-18-15 NAZ FLAT DOWN NEW LOW
CSBR 8-21-15 NAZ UP 30% GAIN DOWN
APHB 8-21-15 NYSE DOWN 50% GAIN DOWN
SKLN 8-26-15 NAZ DOWN 30% GAIN DOWN
CRHM 9-3-15 NYSE UP DOWN FLAT
WMIH 9-28-15 NAZ UP FLAT FLAT
STAF 9-29-15 NAZ UP 100% GAIN BACK TO UPLIST PRICE

I wanted to capture a picture of the general price movement and didn't take the time to capture the exact price change. The price swings I used are not based on closing prices, and do no capture the maximum gain that could have been obtained from the listing application to the uplisting. I am just trying to establish if there is or isn't a price movement associated with uplisting and it's simple to see that a profit exceeding 25% was available on almost 60% of the OTC stocks that were uplisted during the first three quarters of 2015, but if these stocks were held for a period following their uplisting, less than 10% had stock prices that were higher than prior to uplisting. I do not know if this is due to the general overall market.

The purpose of this study was just to evaluate if uplisting was an overall positive effect on stock price. My conclusion is that uplisting is an initial boost to stock price and subsequently, overall market conditions along with the individual stock's fundamentals will become the overwhelming factors behind stock price movement.

Price gains from uplisting can be quite spectacular and quick as cited by Casey Research:

  • RINO International (OTC:RINO) uplisted to the NASDAQ in July 2009 and initially saw its price jump 12% from $9.10 to over $10.19 the day the uplisting was announced. Since uplisting, the stock closed as high as $34.25 in November 2009 - more than 275% above its pre-NASDAQ price.
  • Deer Consumer Products (NASDAQ:DEER) saw its stock trade up over 50% in one week following the announcement it was approved for listing on the NASDAQ. And it's currently trading about 70% above its split adjusted pre-NASDAQ price.
  • China Bio Energy (OTCPK:CBEH) was trading at $5 in July 2009 and then jumped 10% on the day of its NASDAQ approval. It now trades at $11.37 - more than 125% above its pre-NASDAQ price.
  • L&L Energy (NASDAQ:LLEN) is up 75% since it was uplisted to the NASDAQ in February, while the NASDAQ overall is only up 15% over the same period.

There are many subscriber services such as StockJumpers and the one cited above that provide uplisting candidate information. I don't subscribe to any and therefore do not know if any provide useful or reliable information, I avoid these "service providers" due to the lack of liquidity and volatility inherent in OTC stocks. I don't want to suffer the trading equivalent of being left standing when the music stops.

It's not easy finding investable uplisting ideas independently. One method is to look for OTC stocks doing reverse splits in order to increase their share price in order to meet listing requirements. Another method is to a search for uplisting mentioned in conference calls or earnings releases. It is important to review company financials to verify eligibility for listing to avoid stocks that are being hyped. An excellent exclusive SA article from Bleeker Street Research cites numerous occasions where Cellceutix (CTIX) indicated they would be seeking an uplisting and the share price soared from $1.50 to about $5.00, only to crater to new lows.

I have written a few articles on Uniroyal Global Engineered Products (OTCQB:UNIR), which trades at less than half its sales and is poised to obtain a listing in the near term:

LISTING REQUIREMENT MIN. QUALIFIED
Stockholders' Equity 5 million yes
Market Value of Publicly Held Shares 15 million yes
Operating History 2 years yes
Publicly Held Shares 1 million yes
Shareholders 300 yes
Bid Price $4 no

The stock price is currently $3.30 and is likely to spike higher, at least to meet the listing requirement minimum or the company could initiate a reverse stock split to boost the per share price. UNIR management has indicated, as I've related in a previous article, that they would be seeking an uplisting subsequent to the filing of their 10-K later this month.

In conclusion, be wary of companies that state their intention is to be listed but aren't eligible and invest early in companies that are eligible in order to reap the huge upside potential, despite what the overall market tide is. I will be looking for stocks that have yet to run up in price and have upside potential from uplisting as subjects for future articles. Please do your own due diligence prior to investing.

Disclosure: I am/we are long UNIR.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.