Let's delve into the murky world of a micro cap trading under 5 cents, where the exchange of shares for inflated salaries reveals a troubling pattern of financial entanglement.
At the heart of this issue lies the practice of rewarding consultants who swap hours of professional time for tax-exempt shares with warrants, a system fraught with potential conflicts of interest and regulatory loopholes.
Essentially, consultants forego traditional salaries in favor of “financing.” They exchange billed hours or accrued salaries, classified as debt, which can then be traded for units in a private placement. These units often include tax-exempt shares along with additional share purchase warrants.
What’s particularly alarming is how insiders can swiftly transition to non-insiders, granting them the ability to freely sell shares accumulated through these mechanisms. This loophole essentially gives select directors the power to award shares to whomever they see fit, potentially at pre-arranged prices, while public investors are left to participate by paying real cash for the same privilege.
A stark potential example of this financial labyrinth seems evident in companies like Vanadiumcorpse (OTCMKTS: VRBFF), as it has become characterized since January 2021, by inflated salaries against a backdrop of dwindling share price, share consolidation, and decreasing trading volumes.
Moreover, the presence of special permissions granted by current management, such as those led by figures like Paul McGuigan, further complicates matters. These permissions often exempt directors and officers from formal valuation and minority shareholder approval requirements, adding to the complexity of the financial landscape.
A line From VRBFF's financing news releases only found under Paul McGuigan in years, "Directors and officers of the company may acquire securities under the financing, which participation would be considered to be a related party transaction as defined under Multilateral Instrument 61-101. Such participation is expected to be exempt from the formal valuation and minority shareholder approval requirements of MI 61-101."
In essence, the paralysis experienced under 5 cents, could motivate yet another share consolidation, and stems from a cycle of financial maneuvers and incentives, leaving any real investors left holding their vastly diminished/hyper diluted shares navigating treacherous waters fraught with complexity and potential pitfalls. Understanding these dynamics is essential for anyone venturing into the realm of micro cap investments as they can represent unknown risks that could potentially be more relevant than other factors such as the following:
Investing in VanadiumCorpse VRBFF, reporting themselves as a mineral exploration company operating in Quebec, involves various risks, including:
1. Regulatory Compliance: Navigating complex regulatory frameworks governing exploration activities, environmental regulations, land permits, and Indigenous rights considerations and financial reporting.
2. Property Claim Renewals: Managing specific schedules and frameworks for maintaining property claims, meeting exploration expenditure requirements, and timely renewals to retain mineral properties.
3. Exploration Costs: Budgeting for expenses related to exploration work programs, claim staking, land rentals, and regulatory compliance amidst fluctuations in commodity prices and exploration success rates.
4. Market Risks: Exposure to market volatility, including fluctuations in commodity prices, investor sentiment, and capital market conditions, impacting project financing and investment returns.
5. Geological Risks: Uncertainties related to exploration success, geological factors, technical challenges, and resource estimation affecting the economic viability of mineral deposits.
6. Community and Social Risks: Addressing social and environmental concerns, engaging stakeholders, and mitigating conflicts to maintain social license to operate amidst community opposition and environmental activism.
7. Legal and Political Risks: Managing risks associated with changes in government policies, mining laws, and geopolitical tensions impacting exploration activities and project development.
8. Operational Diversification: VanadiumCorp’s involvement in manufacturing battery electrolytes with vanadium introduces additional risk factors, including uncertainty about the origin and quality of the vanadium used in such operations. Moreover, the company faces challenges such as the absence of customers with supply agreements, the absence of positive economic studies, and the utilization of non-economic process technology, which may impact its commercial viability and long-term sustainability.
In summary, investing in VanadiumCorp (VRBFF) requires careful consideration of these diverse risks associated with regulatory compliance, property management, exploration costs, market dynamics, geological uncertainties, social relations, legal and political environments, operational diversification, and commercial viability.
Always consult an professional registered investment specialist advisor before making decisions, and know your limits before you risk more on stocks like this.
GLTY'ALL VITF