from www.otcfilings.com/
Profit Potential from the S-8 Filing?
Written by: Staff
As traders and investors, looking for patterns is part of the daily activity, whether it's performed consciously or unconsciously. Over the last few weeks a relatively strange pattern has emerged among stocks with recent S-8 filings. Form S-8 is used to register shares offered to company employees under certain plans. Company employees can range from Directors and Officers, to consultants and persons otherwise performing services for the company.
Since it's a well know fact that many OTCBB companies are short of cash, naturally, shares become the currency to pay for all types of services the company needs in its daily course of business. It's also natural to expect that persons performing services for the company will sell shares received as payment and convert them to cash. Sometimes these S-8 registrations can be quite large, allowing for substantial dilution for shareholders.
Logic would dictate that S-8 forms tend to be bearish in nature, as dilution places downward pressure on share prices. Now back to the S-8 rally revealed earlier. The fact is that lately, some stocks with very recent S-8 filings are making dramatic moves up in share price, even if just very briefly.
Why is it then, that apparent dilution pushes the share price of a stock up temporarily? Logic would again lead one to believe the fact that its in the best interest of the recipients of the recently registered shares to have the share price move up, or in the very least to have enough volume to sustain the selling without the share price dropping.
Also of note is the fact that S-8 registrations can have different impacts on the share price according to how the investors perceive it. Such as, whether the S-8 is an infrequent occurrence or a monthly occurrence with a particular company. In addition, sometimes the size of the registration statement, in relation to the percentage of outstanding shares, can produce different results. As always, many different factors point to whether a stock is a trading opportunity, investment opportunity or just an opportunity to keep cash. Exploiting a brief upward price move from a form S-8 filing is risky, so it should not be attempted by the novice trader and never with money that one is not willing or able to completely lose.
In addition, S-8 forms should not necessarily be viewed in a negative light because as always many different factors must be considered in whether a company makes for a good or bad long term investment or short term trade. The recent OTCBB and broader market rally that began in February could also be pushing up certain stocks that under the bearish conditions of the last few years may not have moved in the same manner. |
