In today’s article I discuss the potential uplists for SIRC coming in the near future. While I’m normally a little bit underwhelmed by the prospects of an uplist by many of the companies I follow, I think SIRC will see some real immediate benefit to its share price as it climbs the uplist ladder.
Let’s get into it!
Background
Just as some background, and I’m not going to lie it’s been a little confusing the way it’s been released, SIRC has already filed to uplist to the OTCQB. For those of you that don’t know, the OTCQB is where basically every legitimate up and coming OTC traded company aspires to hit as a first step.
I won’t beat this to death, I suggest you read this. But to summarize, to trade on the OTCQB, a company needs to meet a set of standards. This is what I call the ultimate weed out of garbage in the OTC, but still some garbage makes its way through nevertheless!
Some of the key standards include:
- Audited financials
- Current financials
- Price over 0.01
- >10% public float
- No current bankruptcies
You catch the drift. Basically the scam companies on the OTC will never comply with these things. So if you buy a company on the OTCQB, you can at least trust what they’re putting out.
After the OTCQB, it appears that SIRC also apparently wants to uplist immediately to the OTCQX? Someone may need to confirm that, but I’m reading it here. And it sounds like they want to file the uplist very soon.
I definitely won’t re-hash this, but just know that the OTCQX is basically like the OTCQB but with minimal financial criteria. Examples are revenue thresholds, market cap floors, etc. So it’s like a version of the OTCQB but companies have to be generating consistent revenue.
Implications for SIRC Share Price
Now, what everybody really wants to hear, what does this mean for the SIRC share price?
All else equal, an uplist for SIRC will almost certainly be a positive bump to the share price. Why is that? In general, uplisting for a company like SIRC means more trust, better financials, and better liquidity. All of these things tend to lower the discount rate for a company when modeling a fair value share price. Remember, a lower discount rate = higher fair values all else equal.
Let’s discuss each quickly.
The Trust Factor
I said above that there are some scam companies on the OTCQB, but your odds are very low of finding one versus the plain old OTC where like 3/4 companies are scams. By SIRC uplisting to the QB, investors will have a level of security and trust knowing that the company they’re investing in is legitimate. Now,
I’m not saying SIRC was or is a scam company, quite the opposite actually. What I’m saying is that by SIRC having the “OTC” tag next to them, the flaming excrement of scams on the OTC stick to SIRC like a secondhand smoker. Many investors see “OTC Current” instead of “OTCQB” and simply move along.
Now, when SIRC is on the OTCQB it will be separated from like 99% of the garbage. That disgusting smell of companies like GOFF, IFAN, etc. will be gone. Many new investors will almost certainly begin their DD process and be interested in SIRC for the sole reason of them uplisting.
Better Financials
For me personally, this is my biggest hurdle with SIRC. SIRC has been working on audited financials for some time now and they are finally nearly complete. We now have fully audited annual reports for the years ended 2/28/2021 and 2/28/2020 which is awesome.
However, the company today is completely different from what it was back then. It is now forecasting hundreds of millions of revenue and will be profitable. So, unfortunately for financial statement nerds like myself, we haven’t actually seen fully audited financials for the most recent few quarters.
How does this affect the share price? Well, it tends to make investors unsure of the financials they’re seeing because they’re completely self-represented by the company. Whether there is nefarious activity happening or not, the risk is always there for investors.
Now, with fully audited financial statements going forward (and looking back) any cautious investors will now be well assured that what they are reading is legitimate. Either that, or what they are reading is 99.99% sure to be accurate (we have to leave a 0.01% for Enron type situations 😊).
Much like the trust factor I mentioned above, this will reassure previously cautious investors who will now enter the pool of potential investors.
Liquidity and Institutional Investors
This is a completely different rationale than the first two, but has a company moves up through the chain of uplists – OTCQB, OTCQX, NASDAQ/NYSE, etc., liquidity of a stock tends to improve drastically. What do I mean by that?
Right now, SIRC’s share price is almost exclusively owned by retail investors or independent higher net worth investors. Think mom and pop investment funds like those guys at Brownfield Capital in the Big Short 😊.
That in itself can result in fairly good liquidity, and due to the popularity of SIRC investors have enjoyed fairly strong liquidity. Low liquidity raises a discount rate, so high liquidity therefore lowers the discount rate. This tends to raise a share price, all else equal, like I mentioned above.
As we move up the chain of uplists, especially to the NASDAQ, we start getting the big boys: institutional investors like Blackrock, Vanguard, insert 200-year-old financial institution with billions under management.
But wait, why couldn’t they invest before?
Institutions almost always have limits in their funds’ rules which limit which exchanges they are able to trade on. Almost always, large institutions do not touch any common stocks below the NASDAQ/NYSE, and in many cases some smaller institutions will be allowed to dip their feet in the OTCQB/QX. So you might think SIRC is the best thing ever and will make everyone rich, but institutions see “OTC Current” and they just press the old Alt+F4.
As SIRC moves up the chain of exchanges, we can almost certainly expect to see an increased presence from institutions. Some will be via index funds which track, for example, the NASDAQ, in which case the institution has to buy it. But in other cases, you’ll see actively managed funds picking up SIRC because they, to quote DFV, “Like this stock”.
What does that mean for the average investor right now?
As you can guess, your pool of buyers in terms of purchasing power just skyrocketed exponentially. Whereas right now you were very limited in who was actually buying and selling (capital wise), after an uplist or two SIRC can now be purchased by many large institutions and other funds. More buyers and less sellers theoretically raises the share price of course! Which assumes institutions will be buying SIRC, but if we believe in the company, we have to assume institutions will too.
But what does it mean for the company?
While all of this liquidity is nice for the average investor, it will also open up SIRC to many new investors directly. While Arbiter is nice, once SIRC is trading on bigger exchanges, many institutions that wouldn’t touch SIRC before will be now in play for direct investment.
When I say direct investment, I mean direct offerings of SIRC shares to large institutions to raise huge amounts of capital for acquisitions, etc. But I also mean a more likely scenario of issuing publicly tradable debt to large institutions. Everyone loves debt over equity financing, so with an uplist comes more options for debt financing.
And I’m not talking about small debt financing, I’m talking hundreds of millions if not billions of dollars could be made available if SIRC makes its way up to the NASDAQ. Remember, potential institutional debt holders don’t want to hold debt of a company traded on the plain old OTC. They want highly reputable and reporting companies, and that’s what SIRC will prove to investors when uplisted.
Wrap Up
SIRC investors should be very excited about the upcoming uplists to the OTCQB, OTCQX and hopefully the NASDAQ. Uplists will bring more trust and better financials for cautious investors, and it will start to unleash more sophisticated institutions and allow them to invest in SIRC.
For the current investor, this is good good good! All else equal, I am expecting a nice uplift in share price from uplists as they come along. It’s good for investors, and it’s also good for the company, which will have much more access to sources of capital to grow the business. Everyone wins!
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DISCLAIMER – AT THE TIME OF WRITING THIS ARTICLE I DO NOT HAVE A POSITION IN $SIRC. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. I AM NOT A FINANCIAL ADVISOR. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.
