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Shorts FingerMotioned (FNGR) After Hours by Shelf Registration

Shorts FingerMotioned (FNGR) After Hours by Shelf Registration
Written by
Michael Sheikh
Published on
September 12, 2023
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When evaluating the news of a shelf offering hitting after hours on Finger Motion Inc. (NASDAQ: FNGR) it is important to understand that the company doesn’t need money at this point. In June they wiped out Lind Partners debt with the cash on hand. If they were desperate for cash there is no way they would have extinguished the debt. On the fundamental side, they are very close to a break even in their operations this year. So the burning question on investors' minds is why on earth would they do a Shelf Offering if they didn't need money? If you guessed to squeeze the shorts your half right. The shelf offering is a lure to get the shorts attacking the stock allowing real investors to step in and squeeze them.

Exemplary Underwriter Track Record - Univest

It’s no secret that Univest has Chinese roots and has a niche in orchestrating short squeezes with Chinese stocks. FNGR has operations in China and was also under attack by shorts last year as they sold into the Lind Note conversions. Univest was involved in TOP, GDC, and HUDI and seemed to play a part in the run up and their follow-on financing created by the liquidity. Avid Trader dissected some of the run ups in the tweet. These runs were short lived but had a tendency to repeat themselves. They were also characterized by a thin float.

Purpose of Shelf Registrations

An S-3 is a follow-on registration of shares for a fixed dollar amount. When a typical retail investor hears an offering they sell first and ask questions later. That knee jerk reaction was seen in after hours trading as the stock dropped $.50 before rallying $1.00 to close around the $7.50 mark. From the company’s perspective, what is so nice about the shelf is that if market conditions are good it allows the company to quickly capitalize on the good market price without a lot of stressful paperwork. All the disclosures are in the shelf registration so the only negotiating point is the price of the offering and of course the quantity of shares being sold. Thousands of growth companies have this on hand as a tool to capitalize on market liquidity to the upside. This is why they call it a shelf registration, it’s because you can literally pull it off the shelf and do an offering the next day. Many biotechs have shelf registrations in place so that they can capitalize on a positive clinical trial. In the case of Finger Motion and the drama regarding the naked shorting in the stock, it's reasonable to think they are using the Intelidata information that they paid for last year to understand the shorts' pain points and right the wrongs that the short and distort narrative caused. Univest has quite the following so it's conceivable their followers will dive into FNGR driving it higher while unassuming retail shorts step into a landmine.

FingerMotion Value Perception

FingerMotion is extremely fiscally responsible, almost to a fault. They do very little in the way of promotions and the CEO is very factual in his communication to the public. They are unwilling to pay themselves a working wage it seems until they reach the point of profitability. This driving force means that they feel the company is extremely undervalued. The point being if they do take down a portion of the S-3 the price is going to be multiples of this point. Keep in mind the all time high was $17.50 and no offering was done at that time either.

Investment Summary

The short and distort message is clamoring that it is time to exit because FNGR is going to do an offering soon, but the truth is FNGR isn’t doing an offering at the current valuations. Should the valuation increase to $20 or $30/share or higher it's reasonable to think they will bring in some capital. The technical set up for a short squeeze is in the optimal zone. Recapping, the call volume was brisk with close to 10K contracted traded of the September expiration which is just 4 days away. If a bunch of these strikes go in the money there will be pressure from the market maker to purchase the shares to make their delivery. The track record of Univest to take on the shorts is nothing short of impressive. Their strategy seems to be taking on the retail shorts and giving them hope that they can make a trade when the reality of the situation forces them to keep shorting as they move their short basis higher and higher until they run out of margin and are forced to cover during the squeeze. Right now the trend is your friend and FNGR looks unstoppable until double digits.


Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. A guest contributor wrote this article and solely reflects his opinions.

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