Venture and OTC Sh*tCo's... How Do They Work??

[riander5]

I've always wondered over the past say decade how all these Shitco's work. You know the ones I'm talking about, venture stocks... typically mining... lithium, gold... lots of companies HQ'd in Canada and obscure operations in South America.

I've seen people move from general oil and gas BD roles all the sudden becoming CEO of one of these little turds. Or the classic where one person is the CFO of like 5 of them.

Here are some charts of a few I've followed and scratched my head in confusion about how the hell this all works? Assuming a pyramid scheme to the top but.. curious if anyone on here can educate me?

For some reason I feel like BavarianBeast might have an intimite knowledge here ... but he always seemed to find Pharma stocks that went ballistic which was a racket that makes more sense (get drug approved get bought out)

[vengie]

Are you asking how someone starts a business and goes public?

Very unclear what you're really asking.

[riander5]

No, just the general workings of this industry. Hundreds of charts like the first two. C suite executives on multiple companies. Companies attend trade shows and make big press releases. Never accomplish anything.

It's mostly on the mining side. Seems to be 'explorers' obviously. I guess a general question to people who know Junior Mining Co's.

I suppose my original question was a bit vague but maybe that clears it up.

Heres another one

[ExtraSlow]

Junior mining companies are the best asset class.

[vengie]

You're still being incredibly vague.

They work like any startup company, with the exception of being publicly traded.

1) They have a business
2) They aim to generate hype for said business
3) They go bankrupt or gain VC or external capital
4) They go bankrupt or sell
5) They do it again

[ExtraSlow]

External investment is the business model. The company needs to appear to be "real enough" to attract that external investment through VC or IPO so that the founders get paid out. After that, who cares what happens?

[riander5]

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External investment is the business model. The company needs to appear to be "real enough" to attract that external investment through VC or IPO so that the founders get paid out. After that, who cares what happens?

This is more in the vein of what I'm wondering. Who actually puts this external capital in? I can go into the filings and see of course.. it just seems crazy to me. These companies make junior oil and gas co's look like Walmart in terms of investment security

[ExtraSlow]

A good question. Junior oil cos seem to be self funded usually, or funded by a small group of very efficient capital allocators.

I have no idea how that works for mining.

[ThePenIsMightier]

If I'm not mistaken, mining stocks pioneered "flow-through shares" although there are now opportunities for energy companies to use that mechanism and that stimulates more investment from regular people who like to expand their gambling money to investing.
Junior Mining stocks are naturally very volatile, but they aren't all pump & dump scams by any means. The NI-43-101 reports are extremely vigorous and designed to prevent the fraud of Bre-X from occurring in Canada again.

Keep in mind that many of these companies don't plan to develop their leases and that doesn't make them a scam. If FMG is able to advance their Feasibility Study far enough to prove that the 4+million ounces of gold at Springpole can be extracted for $____/oz and the payback period on that project would be less than 2 years, a giant gold company is likely to buy that project and FMG will be just fine to accept their money and fuck off. FMG's stocks would rocket if that happened and they would never put a shovel in the ground and their investors would have <0 fucks to give on their way to the bank.

The ones that are floundering years and years later are more likely just some board members trying to prevent losing whatever fees they get from sitting on the board while attempting to drum up tiny amounts of new money from suckers.

The foundation of many, if not most businesses seems to be "how can we get the money from all these stupid people before they get their money stolen by someone else?"

[riander5]

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If I'm not mistaken, mining stocks pioneered "flow-through shares" although there are now opportunities for energy companies to use that mechanism and that stimulates more investment from regular people who like to expand their gambling money to investing.
Junior Mining stocks are naturally very volatile, but they aren't all pump & dump scams by any means. The NI-43-101 reports are extremely vigorous and designed to prevent the fraud of Bre-X from occurring in Canada again.

Keep in mind that many of these companies don't plan to develop their leases and that doesn't make them a scam. If FMG is able to advance their Feasibility Study far enough to prove that the 4+million ounces of gold at Springpole can be extracted for $____/oz and the payback period on that project would be less than 2 years, a giant gold company is likely to buy that project and FMG will be just fine to accept their money and fuck off. FMG's stocks would rocket if that happened and they would never put a shovel in the ground and their investors would have <0 fucks to give on their way to the bank.

The ones that are floundering years and years later are more likely just some board members trying to prevent losing whatever fees they get from sitting on the board while attempting to drum up tiny amounts of new money from suckers.

The foundation of many, if not most businesses seems to be "how can we get the money from all these stupid people before they get their money stolen by someone else?"

This is the answer I was looking for!

Yeah agreed every business is founded with that last one in mind, but JuCo mining seems to be an endless repeat of board member roulette and declining stocks with nothing to show for it.

Seems like a wild space.

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A good question. Junior oil cos seem to be self funded usually, or funded by a small group of very efficient capital allocators.

I have no idea how that works for mining.

Yea that was where my curiosity came from, every O&G startup typically has a small group of O&G people that know their stuff. Sometimes the wells hit, sometimes they are less, sometimes more, but I don't think its as common as the mining world where to see these types of stock charts. Also, they don't go public at miniscule market caps looking for a pump and dump (anymore)

[killramos]

Downside much higher on mining stocks. Not a lot of dry holes in O&G these days. You use corps to limit liability to prevent dud idea 1 from poisoning good idea 2.

You then buy bankrupt dud idea 1 shell corp for $1 for the tax pools while taking a steaming pile of shit on the investors of dud idea 1.

Reason you go public is it’s an expensive industry that consumes a comical amount of capital.

Any moron can mortgage their house and wildcat a well in Saskatchewan. Good luck doing that in hard rock, better have one hell of a house lol.

[BavarianBeast]

It’s a rich old man scheme.

They buy a little land, get a few other rich friends/“industry leaders” involved and claim they have resources and get a following

They bring a bit of equipment out, do a couple “magnificent” bore samples and then start pumping the stock like crazy

Once it’s pumped enough they dump it and abandon ship.

These are the grease kings

[Buster]

If you are going to really pump and dump, Biotech is the spot.

[bjstare]

Lots of people used lots of words here when they should've just led with this:

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pump and dump

No need for all you big dick MBA grads to mansplain it.