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Reverse Psychology: MNGA's Short-Term Outlook

|Includes: MagneGas Corporation (MNGA)

Summary

Large Registered Direct Offering.

Fast "nose-dive" at time of press release followed by recovery.

A non-fundamental-based investor sentiment.

If you are involved with or hiring for equity research and/or analysis, please do not hesitate to contact me on my attached LinkedIn.

Disclosure: I am long MNGA.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This is not intended to be financial advice, this is simply a presentation of my research with the intended use of showing an example of my competency in equity research. I encourage all readers to do their own research before taking any position in any market, including but not limited to those discussed throughout my presentation. My position(s) may or may not change with future major events or extenuating circumstance beyond the time of publication.

I am writing this, and it may or may not be shared, as a recording of my analysis. In a way, as an "I told you so". This is the most unconventional idea I have ever gone on record about. I compare the ridiculousness of some presented notions, in nearly any other context, to "Nicholas Cage stealing the Declaration of Independence". Please fasted your tin-foil hats and bear (or should I say "bull") with me.

It is 10/11/18 at 8:28 PM as I begin this bizarre trend:

Facts

  1. I am in a long position on MNGA. This position is further elaborated upon in my first blog/article.
  2. MNGA closed previously at .37, today opened at .25, dropped as low as .23, and has been as high as .33 following a press release of share issuance. MNGA closed today at .27 & has gone up during after-hours trading, as of right now.
  3. MNGA's percent of volume shorted has gone from 55.50 on 10/9 to 45.79 on 10/11, with 10/10 being in the 49 range.
  4. Volume was very low on 10/10 compared to the other 2 dates.
  5. Volume was high on 10/11 compared to 10/9.
  6. The offering is expected to close on or about October 15, 2018, subject to the satisfaction of customary closing conditions.
  7. MagneGas had released their Quarter 2 Sales on July 11th, 2018. This date is both, one quarter of a year ago, and roughly a month before the release of a full Earnings Report.
  8. New shares are issued at 0.23 USD.

https://ir.stockpr.com/magnegas/press-releases/detail/2658

Naked Short Report, Nasdaq and NYSE Naked Short Positions, Short Selling Interest

MagneGas Generates $3.0 million in Q2 Sales

Relevant SEC documents

https://www.sec.gov/Archives/edgar/data/1353487/000114420416107686/v442031_s3a.htm

https://www.sec.gov/Archives/edgar/data/1353487/000149315218014353/ex10-1.htm

https://www.sec.gov/Archives/edgar/data/1353487/000149315218014354/form-424b5.htm#a_001

How are you still so confident?

Reverse psychology. The best example, in this context, would be a micro/nano-cap equity decreasing in share price following a reverse split. This occurs because of mass speculation that they are propping up their price to avoid NASDAQ's "Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard", something Magnegas is actually facing. As of November 5th, they can either qualify for a 180-day extension or close at or above 1.00/sh for 10 consecutive business days.

Sounds awfully bad, right?

At first sight, of course, it sounds bad.

So why would they do a reverse split?

To swing strong bear momentum into a bullish trend. And up to this point, it has worked, please reference facts two and three about price and short volume. The short sentiment and positions were so strong, they would have had to announce a cure for landing on Mars to even break 0.50 again. With it on the other side of 50, the long market is at least slightly in their favor over shorts.

With this momentum, and here's where I get speculative, they must be ready to report very strong Q3 sales numbers. More importantly, today marks exactly one quarter of a year since their last quarterly sales announcement. If you think this is outlandish, I understand, feel free to not waste any more of your time.

If you're still with me, have you pieced two and two together?

Exercising share issuance to rid the short position stronghold, shortly before announcing high quarterly sales figures, could be an amazing way of fully reversing the negative direction of this equity. Now refer to fact 6:

I believe this sales figure announcement will take place on, if not before, October 17th, 2018.

What is the worse case scenario?

If none of this theory materializes, MagneGas surely issued these new shares to have further funding for operations, research, and other developments to build upon their continually improving internal outlook. Even more so than before, Magnegas appears to have a high floor and potential for a high ceiling. I could not be more confident in my current position.

Disclosure: I am/we are long MNGA.