Nov. 27 at 9:05 PM
$CAPC THIS IS WHY WE MUST WORK TO GET THE STOCK PRICE ABOVE .05!
Shells often trade on OTC Markets (e.g., Pink Sheets), where the
$0.05 bid price threshold is a key differentiator under OTC rules.
• Above
$0.05: Signals a “cleaner” shell with better compliance, liquidity, and lower fraud risk. This strengthens the shell’s negotiating position, leading to higher acquisition costs but smoother post-merger trading.
• Below
$0.05: Indicates potential distress, non-compliance, or manipulation risks, weakening the shell’s leverage. It can make the deal cheaper but increases negotiation friction due to cleanup needs and investor skepticism.
Negotiations typically revolve around valuation (shell’s “price” in shares or cash), lock-up agreements (to prevent share dumps), and post-merger plans like reverse stock splits (to boost price). The
$0.05 threshold amplifies these dynamics, as it affects OTC tier eligibility and broker-dealer quoting under SEC Rule 15c2-11.
