The Reasons For The DROP Many folks wonder for the reasons of the big drop from 3.6 to 34 cents. My 7 years experience in the Canadian markets says :
1) The Canadian market is primarily retail investor driven and it is not funds driven. Few funds buy the small Canadian companies let alone when these stocks are penny stocks like SCS below $1.
Either they are not allowed to do so or they do not want to do so and they prefer the US markets with the increased liquidity.
2) This is why especially the small Canadian stocks are heavily retail investor's sentiment driven.
This means that the swings are steeper in the juniors of the Canadian market because the retail investor adopts a herd behavior very easily. The Canadian retail investor acts also MORE like HERD than others because he is extremely FEARFUL, HESITANT and more RISK AVERSE than the average US retail investor on the downside.
On the upside, the average Canadian retail investor can be fooled easier than the US retail investor. Look how the Canadians are running behind T.NVA now when they were dumping it at 2.7 last summer. Now they say that NVA has condensate....This is so funny....NVA's operating net back has little changed and remains very low but the HERD is buying expecting what and when ??? Same goes to the grossly overpriced, V.VCA, V.PPY, T.TOU, T.POU etc.
In other words, the negative momentum gets an intense exponential pace which is steeper in Canada than in the US markets where the funds can absorb ALL the offer and turn things around. Here in Canada, there are few funds to do this especially for penny stocks.
Eventually, a negative momentum drives the stock lower than expected and a positive momentum drives the stock higher than expected because there is not any big seller to dump a lot of shares.
3) Front Street Capital sold SCS in late 2012 due to tax loss selling. They sold as many as 2,8 million shares which created this huge drop as SCS is a small company with limited daily liquidity.
this is huge......2,8 million shares were sold from November until December 2012. Contact Morningstar to confirm.
The retail investor got scared of this dump and he sold too....typical herd behavior....thus the drop became steeper....
In the meantime, No news from the company during the last 4 months also impacted negatively the retail investor's sentiment. This lack of news made the retail investor's sentiment worse and made him sell. He wondered what is going on ? Obviously he thinks that the fund manager of Front Street Capital was right no matter his proven poor track record....or maybe he wanted to pay less tax and cover some other gains.....
4) The FUNDAMENTALS have not changed. The company is clear with its business plan as presented in Q3 2012. They had said the drilling activity would resume in Q4 2012 with one rig. The drilling activity truly started in Q4 2012.
Waterflood has also just started......
No news means that THERE ARE NOT ANY BAD NEWS TO WORRY ABOUT but business goes as usual.
If there was some bad news, the company would release it because it is obliged to do so.....SIMPLE. Check V.NZ, T.TBE how bad news they released lately.