2021 has thus far been a year of bizarre market activity, and phenomenally high SPAC and OTC investment rally’s. After the incredible surge of companies like GameStop and AMC Entertainment tantalized the global markets, everyone wondered what the army of internet investors would set its sights on next. It appears that OTC (Over-the-Counter) Penny stocks that are undergoing a “Custodial Change” is the next craze among the new band of investors simply known as “Reddit Traders”. The question now is simply, what OTC companies, which are going through a “Custodial Change” are the prime candidates for a wave of Reddit Traders?
First, we need to understand what a “Custodial Play” is, and why they are predominately within the OTC markets, and why these stocks can surge between 1000% and 5000% within a single week. As with all, these are highly risky investments, but with abnormally high return, which is why Reddit Traders have now set their sights on them. This, along with the fact that the float of these companies are often very small, to a point where its possible their entire free trading float can be nearly 100% purchased during a surge.
Custodial plays are simply when a “shell” that is inactive for a number of years begins the process of changing its ownership, or rather, a custodial change. A shell is a public company that has a share structure in place (you can buy and sell shares in it), but no real assets or active company inside it. These shells become dormant, and usually stay this way for multiple years. Because of this, the price of the stock usually falls well beyond its 52-week low point, and creates a “ultimate bottom”, which is usually the absolute bottom (based on SS) the stock will go. If they stay this low, the stock will stay dormant for an indefinite amount of time.
However, from time to time when a private company seeks to go public, and they are not able to do this via IPO or creating their own free trading company, they will reverse merger their private company into a already established public shell company. This is done by the private company doing it them selves, or hiring a firm to do it for them, find a dormant shell company, and initiate the process with the state courts to change the custodianship of the shell company, in order to pave the way for the private company to reverse merger their company into the shell, and thus changing the shell into a fully trading, operational, public company.
It’s no surprise why this alone with skyrocket a dormant shell company thousands of percent in a single week.
Some Recent OTC Custodial Plays
- OTC: MSTO – Masterbeat Corp. was a reverse merger custodial change, where SBQ Holdings, a real estate and precious metals asset company, became a subsidiary. The stock was only $.007 in June of that year and hit a 52 week of $0.35 later that month (an increase of 5,000%).
- OTC: EXLA – Helmer Directional Drilling is a custodial play. In mid-September of that year EXLA could be bought for as cheap as $0.002/share and has since peaked at .0149 (nearly a 750% gain)
- OTC: KDCE – Kid Castle Entertainment is a reverse merger play. In mid-September of that year KDCE traded at around $0.03/share and hit a high of $2.50 (an 8,333% increase) on filings that a cannabis company was rolling on in from custodial change paving the way.
- OTC: ADIA – Adia Nutrition just had takeover in 2019, while ADIA traded as low as $0.0018/share and today it hit a new 52 Week high, reaching $0.054 intraday (a massive 3000%)!
- OTC: CRVH – Chilco River Holdings Inc. had its takeover Granted by the courts, but all of its action seemed to have happen when it was revealed the court date was in progess. This made CRVH trade for .004/share and soared to $0.06 simply by the courts waiting for a custodial decision for a 1500% return!
The 2 Main Phases of Custodial Plays
The first phase comes when investors catch wind the shell is up for a legal/court decision on whether or not the custodian is granted control of the company. This can generate a significant amount of interest and share price appreciation because traders know that this shell will eventually be on the block as a reverse merger vehicle for an opportunistic private company looking the enter the public arena.
The 2nd phase happens when the new company buys a controlling interest or puts an asset (usually a new corporation) into the public vehicle. This will make the stock surge even more than the first phase, as the more the company is the worth, the more the shares will be worth and the bigger the potential gains.
Who is a Prime Example of the next OTC Custodial Change Play?
Perhaps the most recent and most probable example of a OTC Custodial Change Play, similar to these of the list of recent examples, is Viyya Technologies, Inc. VYON
The company has been a Dormant Shell company since 2008, with no filings or news or any company activity since then. This checks the first box. Now, it has been revealed through searching through state court records that its now official the company is in the process of a “Custodial Change”. This process started only days ago, and is about the enter the First Phase of a custodial change. Below, are some of the public court documents, and a link to the live court process, where you can check on what process the court is at.
This simply means the case has been brought to the court, which happens on a number of OTC stocks. However, the big revelation came just a few days ago when the state court updated the court date and current stage. This now means any day within the next 30 days (+/-) there should be a decision on the next phase.
Now, this has changed into a pure “Custodial Change” OTC Play. Next, the court will grant the entity a change of custodianship. Following that is when we find out who and what company will be reverse merging into the newly Reassigned OTC shell company.
The following link has now been generated by the courts in order for shareholders and the public to monitor the status of the custodial change court case.
As with any small-cap or Pink Sheet company, there is significant risk associated with such investments, and it goes without saying that this article in no means is suggesting investing in such a investment. However, the point of this article was to point out a recent trend among investors who search for high risk/high reward investments. We will keep monitoring this court case, and hopefully be able to bring in updates below as the court case rolls on.