In February, SECTOR 10 Inc (OTCMKTS:SECI) made an astonishing roller coaster move that captured our attention. Investors’ sentiment on this name grew because an unexpected broker-dealer announced the acquisition of more shares of SECI.
While the company has patents ten issued in the United States along with interesting technology, the investors are only looking at other players in an attempt of making extraordinary returns. Taking into account the stock charts, some have succeeded.
From below the $1 mark, the price spiked up to touch the 52-week record highs of $6 before ticking down back to $2. Now, both the volume and the price are indicating that the momentum has disappeared. However, we are at critical price levels, at which current movements will determine the future of the stock. If the price continues above the $1 mark, longs could try to push the price higher again. The upside is substantial. On the downside, if no news is received and market sentiments keep weakening, shorts could push the share price back to the $0.30-$0.20 range.
Many questions about the price action will be answered in the following weeks. Before we go on, check the most recent share price action:
Sector 10 Inc. was originally incorporated in Delaware on June 11, 1992. It is now headquartered in Bluffdale, Utah. The company has developed and seeks to market pre-deployed emergency and disaster response equipment with the world’s first patented Stationary Response Units and Mobile Response Units. Sector 10 has patents issued in the United States and patent applications pending with U.S. and international agencies. Sector 10’s initial SRU and MRU design have been developed, produced, nationally test marketed, and sold.
What are the catalysts here?
First of all, there is a lot of social media activity on this name. It is not only contributing to creating the recent 52-weeks record high volume. It is also enhancing the transparency and the price discovery mechanism. Additionally, it is behind the recent share price volatility seen in the trading exchange. The following is an example of the popular forum iHub, but Facebook and Twitter are among the tools that market participants are using to exchange opportunities. Check that every day there are new comments about the stock:
Also, the company is involved in litigation to recover damages from a technology theft and laundry operation that almost destroyed all the market capitalization of SECI. The following is what readers need to know:
“The lawsuit was filed in a Utah Court against ADT/TYCO acquired subsidiary Proximex. Other parties in the case include people and entities who breached a manufacturing contract, started various new corporations and laundered the technology across various states, creating PSIA and PSIM along the way. Unbeknownst to Sector 10, one of its contracted manufacturers and affiliated parties set a plan in motion to launder and sell the technology to another public entity, ADT/TYCO.” Letter from the CEO
Additionally, it is critical to get to know – because it should be affecting SECI’s stock price – that a trial date is expected before March 31, 2018. We found this information in the last 10-Q. Check it out:
From our point of view, it is very difficult to calculate the amount of money that the company could receive from the litigation. However, we believe that the CEO, in February, exaggerated the potential results in this letter. Please also keep in mind that the CEO warned about the conversations on Twitter and other sites:
Who is buying?
The market pushed up the stock after Virtu Americas LLC revealed that it is acquiring more shares of SECI. The player owns 7.56% stake in the stock. Taking into account the stock performance, many other individuals seem to be following Virtu’s idea. We want to take the time to warn readers about this practice. Copy traders never make good returns. In our opinion, market participants need to be ahead of the market, following what others are doing seems to be a horrible idea.
Currently trading with a market cap of $0.3 million, SECI is an interesting story among small caps. However, we have our concerns about the financial statements of SECI. The company has no cash. Thus we don’t understand how the lawyers are being paid for the litigation. Additionally, the company is said to have patents, but the intangible assets are equal to zero. As a result of these features, we need to mention that betting on this name is quite risky.
To sum up, make your own due diligence on this name; some market participants are making astonishing returns, but others may also lose a good portion of their money.
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Disclosure: We have no position in SECI and have not been compensated for this article.
Image courtesy of Lee Haywood via Flickr