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Make Generational Wealth When your Company MVIS Gets Acquired

6/28/2023 Anant Goel

Signs that MicroVision (NASDAQ:MVIS) is about to be Acquired

    Insider trading is rampant, and it’s everywhere. It’s not just company insiders. Banks and hedge funds can have advanced knowledge of mergers and buyouts, and they take advantage of the retail investors with both hands, and it’s quite legal.

    Often times an investment bank like USB will facilitate a merger. They’re paid huge sums of money to do this. Someone always talks, and buyouts and mergers always leak. There are telltale signs months in advance that you can use to your advantage.

Here are some signs that your company MicroVision is about to be bought out.

1. Before the buyout or the merger, the company CEO/CFO would talk about the future possibilities.

    In January 2022, Anubhav (MicroVision CFO) said that he expects the industry darling (which they obviously believe is MVIS) to be bought out within 18-24 months. That’s a timeframe of July 2023-January 2024. This suggests multiple high volume series production deals (for MAVIN and MAVIS) are expected to be signed over the coming months to support a big rise in the share price and to enable a buy out at an acceptable level.

    Their business model includes an amount they will receive for the hardware and a fixed price software fee per unit sold (that will not reduce over time) and they will be valued in line with software company multiples. A recent example of this is Adobe buying Figma at $20 billion. That’s 50 times their annual revenue of $400 million! A $20 billion buyout for MVIS would put the share price in the region of $120 per share.

    MVIS is ridiculously shorted. Institutions are increasing their holdings. Blackrock have just filed that they now own 7.9% of MVIS─ 13 million shares. MVIS retail shareholders keep buying the dips, no one is selling. We all know “What we own and what it will be worth!”

   Reminder for people as we head into the summer, that if we turn out to be "right" and this r/MVIS subreddit starts to get flooded with lots of new people, MVIS stock will rocket way past $120.

    This time, MicroVision has 350 employees in 4 locations (300 technologists) and some high profile Auto Companies as customers from IBEO acquisition... and they have revenue growth.

    Sale of 1,000,000 LiDAR sets (one for each new car) produces $2,000,000,000 in revenue and makes an absurd amount of net profit ($1,200,000,000) at 60% margin for hardware and software. Market for LiDAR sensors with perception software is huge; at 70 million new cars sold each year.

2. Management stops defending the stock price.

    CEOs and CFOs usually have a large stake in the company. Whatever you’ve got in the game, they’ve got more. If their stock drops inexplicably from $8 to $2.80 after market, the CEO is taking a massive hit to their net worth.

    If the company isn’t coming out with positive PR, or trying to reassure investors, it's possible they've already signed a deal to sell for $32. After all, what difference does it make if it the stock treads water between $3 and $32? In the CEO's mind, the deal is done.

    Companies don’t like to see their stock prices plummet because it makes it harder for them to borrow money, or issue shares to raise capital. It’s also a matter of prestige. Being the CEO of a billion-dollar company is a bigger deal than being the CEO of a company worth $675 million.

    Sometimes before a merger, Wall Street will crush a stock to shake out the ordinary investors. Their goal is to own as many shares as possible. If you own this stock, Wall Street can’t own it.

    So, what is the company’s management saying? Are they being silent while the stock price plummets from $8.20 to $2.80, or are they going on an outburst to defend the company?

3. Social media posts are overly bearish and calling for the CEO’s removal.

    Short sellers often like to post crap like this: “CEO Summit is terrible. If the CEO was replaced, everything would be great.”

Posts like this accomplish two things.

One: It scares new investors from starting a position in the stock, because nobody wants to invest in a company with bad management.

Two: It conditions current investors into thinking that replacing the CEO will fix the company. Then, when the buyout is announced, current investors will be more likely to support it.

4. Wild fluctuations in stock price.

    Stocks shouldn’t move that much on a day-to-day basis, especially in the absence of any news. Unfortunately, the rise of SPAC, tech, and meme stocks has conditioned some investors into think that wild swings are the norm.

    They aren’t.

Most public companies have a market cap of $2 billion or less. When MVIS stock goes from $1.80 to $8.20 in one month, without any news, that means market cap went up by $1 billion dollars in 30 days. Then over the next 16 trading days it goes down from $8.20 to $2.80 after hours on June 27th, 2023─ with a 25% drop in one trading day on June 27th including after hours.

    That’s a haircut of $900 million dollars in 15 trading days… and 25% drop in one day on June 27th, 2023.

You need to ask yourself, “Is this drop warranted by anything?”

    What’s the news? What’s the sector doing? What’s the market doing? What’s the competition doing? There is no news, sector is up, market is up and competition is up on the day.

    What could possibly warrant a company losing $900 million dollars in market cap?

If you can’t find an answer, then it’s more likely MVIS stock is being manipulated. True, it could have been overvalued to begin with, but when you’re trying to establish whether your company is about to be bought out, you’re not looking for one sign, you’re looking for several.

    Upwards price action can also be indicative of a buyout. If your stock was crushed down to multi-year lows but has been inexplicably rising over one month (May to June 2023), and then drops like a rock, you might be looking at a buyout. Market makers have a lot of patience. They can spend years in the red because they know for a fact that a payday is coming.  

    MicroVision CFO said that he expects the industry darling (which they obviously believe will be MVIS) to be bought out within 18-24 months. That’s a timeframe of July 2023-January 2024. This suggests multiple high volume series production deals (for MAVIN and MAVIS) are expected to be signed over the coming months to support a big rise in the share price and to enable a buy out at an acceptable level.

5. Large amounts of phantom premium are on the table.

    Buyouts usually come with large premiums. The question is, how much of that premium is real, and how much is Fake?

In a free market, if your stock is trading at $8, and the buyout is $32, that's a 300% premium.

    But in today's market, Wall Street is more likely to smash your stock down to $4, and then organize a merger at $32. ($24 real premium and $28 phantom)

This creates an illusion that your stock is being given a 300% premium.

    To calculate phantom premium, you first need to establish a fair value for your stock.

What are its peers trading at?

What sort of PE ration do other stocks get?

    If you, and others, believe your stock should be at $32, but it's trading at $4, you've got 300% in phantom premium available for market makers to push a merger with. The higher the phantom premium for them to play with, the more likely a buyout is.

Higher premiums are exciting. Shareholders tend to vote yes on things when they’re excited.

    Imagine you’ve been sitting on a stock that’s been bleeding out for two years. Then someone comes around and offers to take it off your hands for 8 times your money.

    At this point you’re so frustrated with the stock, you agree to sell because the stress has been too painful.

6. Sneaky option trades.

    There’s a lot of talk about unusual options volume, but that isn’t the only thing you should be looking at. When examining the options action on a stock, pay close attention to the low-volume high-priced trades.

    100 contracts don’t sound interesting. That sounds ordinary. But if the price of each contract is $5, that’s a $50,000 trade. The person who made the larger trade probably has better information. You see this with long-term options (LEAPS).

    I’m lot more interested in what the guy who drops $50,000 on a play is thinking, than the guy who drops $5,000.

    If market makers are shaking the tree (dropping your stock several % to trigger stop-losses) then make sure to comb through the options charts after the market closes. You might find some interesting trades.

    I’ve seen stocks get nuked 25% and then someone immediately buys millions in call options. The next day the stock is recovers. This type of behavior should be illegal, but it’s not.

7. “Sell this, buy that.”

    Fake users on message boards are always trying to mess with you. These people can be bots or paid trolls employed by hedge funds or banks.

    In the case of a buyout, their goal is to get you to sell. They do this in many ways, but the “Sell this, buy that,” technique is quite common.

8. Bizarre price action prior to upcoming milestones.

    MicroVision is expected to report earnings every three months. These events are expected. Earnings can be a blowout, or they could be a bust. Both will affect the stock price.

But there might be other more important events on the horizon, like important contracts, product launches, major trade events, etc.

    Milestones can be almost anything that might vastly affect your stock price. If you’re invested in a company, you must be aware of all its upcoming milestones, because Wall Street will play games to mess with your head.

If a big event is coming up, Wall Street might tank the stock prior to it. This creates the illusion that they have insider information and they know it’s going to be bad. They’re abusing the efficient-market hypothesis. You see the stock dropping, think that something is wrong with the business, and you sell.

    But what actually happens is the buyout comes before the big event. You see this in biotech all the time. Companies have an important phase 3 trial coming to conclusion soon. They’ve seen the initial data and they know its great. They’ve also shared this data with the companies bidding to buy them out. The bidders know that once the data is released, the stock will jump huge. So, they need to act quickly. Before the milestone is reached, the company is bought out.

Thinking you were being smart, you waited to buy. But that’s what they wanted you to do. By waiting, you left more stock on the table for Wall Street to gobble up.

    This is why if you believe in a company, you must buy it, hold it, and avoid looking at it on a day-to-day basis.

9. Resignations by high-level management or board members.

    In a vacuum, the resignation of key members of a company can be seen as a bad thing. It begs questions like: If the company is doing well, why are they leaving? Where are they going? What’s wrong with the business?

But, if you believe that your company is planning to merge, or has secretly already agreed to merge, and the announcement might not be for several months, then the resignation of key employees can be seen as bullish.

    This is true if you think the employee who resigned would know about the merger, and might also be redundant in the new company.

    When companies merge there are cost savings. Supply chains are merged, technology is shared, and many employees are let go. You don’t need two chief financial officers, or two chief technology officers. There will be some redundancy.

These people might have already been informed that their job will be eliminated, or they might have figured it out by themselves. Not wanting to be unemployed for any amount of time, they exit prematurely.

    If they’re a high-level insider, they probably own stock in the company. Check out the insider transactions. If they held their stock, but left the company…that can be a major tell.

But if you knew a buyout was coming, then absolutely you’d hold your stock. It’d be foolish to sell otherwise.

10. Your company is unloading assets that won’t fit well into a merged company.

    This one can be a bit trickier because you’ll need to do a lot of research.

First you’ll need a list of assets the company has been dumping. This could be a lot of different things. Buildings, vehicles, technology, patents, trademarks, unrenewed leases, etc.

    In a merged company, some of these assets might be less valuable or even worthless. So they want to get them off the books for top dollar as soon as possible.

11. Your stock has become disconnected from reality

    Let’s say your stock’s fair value is $32 and its trading at $4, you know there is a price disconnect.

In a perfect world this would be reflected in your stock price. Each day of the week your stock would go up a few cents. Obviously there are other factors at work, but this type of thinking should give you an idea of where your stock should be heading, and how quickly.

    It becomes painfully obvious that your stock is being manipulated if instead of going up a little bit each day, it goes down a big amount like 25% in one day after hours to boot.

The larger the spread between what’s happening, and what should be happening, the larger the chance of a buyout.

12. Disconnect in sentiment.

Imagine you own MicroVision stock MVIS and the company is making progress towards the goal of Automotive Tier 1 contracts in second half of year 2023, for LiDAR sensors. Your business is booming. Your customers are happy. Your employees are happy.

    One day you show up to work and find media posts, Seeking Alpha articles, news articles, analyst reports, etc., broadcasting that MicroVision is a meme stock, running out of money, has no revenue, they can’t sell anything, will soon sell more shares to dilute existing shareholders, yada, yada.”

None of this is true, but MVIS stock price dropping. New investors start avoiding your company stock. Employees are frustrated and some of them quit.

Months go by and you’re pulling your hair out. Everything is terrible now. You try to get a loan from the bank, but they don’t want to loan you money.

    Right near the end of the Qtr, an investment banker in pinstripe suit shows up and says: “Hey, bud, I heard you were having a rough time. I have a client and they have been thinking of expanding and you have a great product line and IP assets. I’ll take it off your hands if the price is right.”

Now it all makes sense. Your competition was intentionally trying to tank your business so he could buy it for cheap.

    This happens on the stock market quite a bit. It’s done with fake comments and price target downgrades.

Like in April 2020 when Goldman Sachs analyst Paul Choi slashed his price target on Immunomedics from $24 to $5. The stock dropped 12.35% to $9.34.

    The reason for the double downgrade was the FDA had found some quality control issues at one of Immunomedic’s manufacturing sites.

Six months later, Immunomedics was bought out by Gilead Sciences for $88 a share.

    The disconnection was: Does a quality control issue at a single manufacturing site warrant an 80% haircut to a price target?

Heck no.

And those are things you need to watch for. The more ridiculous the price action, and the more ridiculous the reasons behind the price action, the more likely your company is to be bought out.

[Curated content based on excerpts from posts, blogs, media articles, and sponsored research]

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