Short GTII: Hot Air

Global Tech Industries Group ($GTII) describes itself as “a publicly traded Company incorporated in the state of Nevada, specialising in the pursuit of acquiring new and innovative technologies”. In reality it’s a borderline fraudulent, pump and dump shitco with no revenues, no operations and negative book value, yet somehow trades at a $270m market cap. Followers of the meme stock world would note that it has traded at a stupid market cap for a while, and hasn’t collapsed to the extent of many other smaller meme stocks like BBIG and ALPP. However I believe there to be significant short term catalysts through share issuances and inside selling that make this the optimal time to open a short position. I’m going to be covering some of the background of the stock more for entertainment value than laying out a short case as the worthlessness of the company should be apparent with one look at the financials.

The earliest information I can find on GTII is SEC filings from 1996 under the name “Nugget Exploration Inc”. In 1999 this public shell merged with private company GoHealth.MD, which was a classic revenueless internet stock at the peak of the dot com bubble. The stock crashed 99% from its peak and continued to languish revenue less throughout the 2000’s until 2008. Now called ‘Tree Top Industries Inc’ the stock price increased over 1000% upon news of an acquisition of telecommunications company Ludicrous inc. Ludicrous actually had revenues, however their $3000 of revenues was dwarfed by $4m of operating expenses for the parent co. The majority of these operating expenses were in the form of stock based compensation and cheap options given to current CEO David Reichman and the rest of the management team.

This is the key to Reichman’s grift. Since he took over in 2003 the company has continually taken a loss, having consistently no revenues. However, the majority of expenses are in the form of stock based compensation, allowing the company to continue almost breakeven. In fact in recent history the stock based compensation has directly correlated with the share price, as large increases in price are met with aggressive returns to management, allowing them to cash out. Essentially, this company has been a vehicle for management to take money from naive and unsuspecting investors. This strategy of aggressively issuing shares to management allows them to stay alive (with very little cash burn) while maintaining control (Reichman and other management have always held a large proportion of the company) and essentially dilute shareholders without having to announce to the public that they’re issuing shares. The little cash that they do burn is offset by small capital raisings when the share price is up, or related party loans from Reichman, who is happy to wait out the next pump to get paid again.

The 2010’s saw more of the same, with the occasional pump in stock price being followed by large stock based compensation and a dump in the stock price. However as 2021 rolled around, after already rising 400% throughout 2020 as the stock market exploded, the craziest thing happened. In the last week of January, spurred on by the retail mania around Gamestop all of the worst, most heavily shorted companies on the market exploded in price. GTII went up 2000% in a month as they released multiple major acquisitions to capitalise on the attention. At its peak that month it hit around $2.50 a share (up from 10 cents).

Along with this came the many conspiracy theories around trapped shorts and liquidating hedge funds. In reality, hedge funds didn’t care about a random OTC microcap in $GTII. Short interest currently sits at .2% and has never been especially high, though don’t let that stop the theories. Unlike $GME, the 2021 pump was fueled by speculative buying of a low liquidity OTC Shitco spurred on by a few Twitter and Reddit accounts who relentlessly pumped the stock. Purely speculation, but I suspect at least a few of those accounts have been paid for, as they essentially post non stop about $GTII, constantly reiterating that “shorts are trapped” as the share price grinds lower and every catalyst comes and goes. The catalyst for the big reckoning was supposed to be their “stock dividend”, which would account for all the “fake shares” sold naked short. The stock dividend hit on April 15th that saw nothing but a quick pump back into a steady decline as everybody got their dividend with no dramas. The next “catalyst” is those same dividend shares becoming non-restricted on October the 16th, which realistically just means more shares free up for potential selling.

Regarding the acquisitions, I’m not going to go back through and research the many dodgy deals that the company has made, just their most recent. In June this year GTII announced that they were acquiring ‘AI Commerce Group LLC’. A quick google search finds that this company is based out in Puerto Rico  and was created less than a month before the announcement of the acquisition.

(https://rceweb.estado.pr.gov/en/entity-information/?c=508692-1511) 

The webpage has no information to suggest any actual business, just buzzwords and a contact us page. According to their 8K GTII are paying for this acquisition with 20 million shares, which at a share price of around a dollar at the time comes to a not insubstantial $20 million for what is essentially a box of nothing with an AI related name. It should be noted here that these shares are tied to performance so the sellers will be given 5 shares per $1 of revenue generated. I suspect that there will be very little revenue generated by this company, and therefore the price paid will be significantly lower than that but it is still an absurd acquisition for what seems to just be a webpage with an AI related name. I haven’t investigated their other deals but I suspect a detailed look through would yield similar results considering the company still makes literally 0 revenues after decades of acquisition announcements.

It’s fairly obvious that this company is a worthless bag of hot air, but why short it now? Squeeze risk is high as shown by the huge 600% pump in September 2022 (uncorrelated with the other meme stocks) and borrow cost isn’t cheap at 12% (per IBKR).

Looking over their quarterly financial statements there is a clear anomaly that occurs within the quarter ending March 31. The company's expenses (which had been stable around a few million dollars a year) blew out to $72m in ONE QUARTER!!!. These expenses were born from an issuance of $72 million of stock, with $17m of that going to charity (I haven’t even bothered exploring that) and the other $55m going to their only two remaining employees in Reichman and Director of Strategic Planning Kathy Griffin, who has been there since 2009. Even for a company this obviously dodgy, this is an ambitious move, with the share count increasing over 20% in one quarter. Naturally, the two have been selling hand over fist, with 300 thousand shares (at prices around a dollar) being sold in the past 3 months alone.

With Kathy still holding $20m and Reichman still holding $65m (plus multiple previous executives with still large holdings) I see no reason for the selling to abate as they steadily try to cash out while this worthless shell still trades at a ridiculous $270m. With the size of this issuance of shares I think management sees the writing on the wall as other meme stocks crash around them and I think a short position here makes sense. I expect $GTII to trade lower as other short squeeze theses are proven wrong similarly to $BBBY. In a worse case scenario situation where the stock squeezes I suspect many insiders would be quick to cash out, while more realistically the price likely trades steadily down to sub $10m where it belongs. The community seems tired and dejected, while the paid pumpers have moved their attention to the next shiny ticker Fingermotion. The company won’t go bankrupt, as David has made plenty enough money to bail out the company with cheap loans until the next pump, but I find it hard to see it maintaining its current price.

I hope you’ve enjoyed this writeup if not for the short idea, for the fascinating look into grifting shitco land. For anybody with a working brain it should be clear that $GTII is a worthless bag of hot air trading at over $200m based on hope and conspiracy theories. CEO David Reichman’s grift is so blatant and so over the top that I can’t even hate him for it, anyone that has been suckered into this company probably deserves to lose their money. I believe the current setup with the recent share issuance and dividend release to be very attractive. I see no way that insiders (who own 30% of the company) don’t sell into every pump in price, providing downside protection for a short position in a stock with over 90% downside.