One of the most interesting stocks right now on the OTC is clearly Discovery Gold Corp (OTCMKTS:DCGD). This is being traded as an archetypal reverse merger play with cannabis written all over it. As we will outline, the case isn’t hard to make. But the stock is finally starting to pull back after a hellacious run higher, and the questions evaluating the reality of the situation have never been more important. So, let’s look at the facts.
First of all, driving support for the idea that this is a cannabis company hiding in the costume of a defunct gold miner, we would point to exhibit A: the company’s address on OTCmarkets.com is now 1000 2nd Ave, Suite 3900, Seattle, WA, 98104. That just happens to also be the address of “Cultiva Law, PLLC, Tad Mailander’s famed law firm in charge of the Cannabis Strategic Ventures and American Cannabis accounts. It’s unlikely that this is a coincidence.
Discovery Gold Corp (OTCMKTS:DCGD) could be pulling a fast one, though. In other words, perhaps Tad and his team are as yet unaware that the company filed to shift its address to this location (doubtful, but not impossible). In such a case, we might not find anything else of interest here.
However, as we will see, there is more to support the idea that a reverse merger is now underway to take control of this ticker.
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As noted above, DCGD shares have been on the march to the upside, and we believe the move is a consequence of a blossoming sense that the stock is the focus of a reverse merger underway to shift control of the ticker to a cannabis business. We would, at this point, suggest that one should still be somewhat cautious because, even if that is the case, it might not be a profitable or successful cannabis company set to take the reins. But that’s one step further down the road from here. So, let’s stick the point: evaluating the RM case in the first place.
Perhaps the most important signal is the 8k issued on July 1, 2019 (the massive run higher in the stock got started on July 2, 2019):
“(a) On June 20, 2019, GRN Funds, LLC, a Washington limited liability company, and its manager and Chief Executive Officer, Justin Costello, purchased a total of 139 million shares of the Registrant’s common stock representing 55.65% of this issued and outstanding shares, in a private transaction with Stephen Flechner and David Cutler. As a result of the closing of the transaction on June 25, 2019, GRN Funds, LLC and Mr. Costello acquired a majority of the issued shares eligible to vote. The total purchase price of $300,000 was paid in cash by GRN Funds, LLC. As a condition to the closing of the transaction, the Registrant’s Directors Mr. Stephen Flechner and Mr. Ralph Shearing resigned, and Mr. Flechner resigned as Chief Executive Officer and President, and Mr. Justin Costello was concurrently named Director of the Registrant, President, and Chief Executive Officer. The Registrant is a business combination related shell company, as such terms are defined in Rule 12b-2 under the Exchange Act.”
Justin Costello, it turns out, is a graduate of Harvard Business School and CEO of GRN Funds, LLC, a private equity and hedge fund with a range of highly aggressive strategies in play. Given that the cannabis-related space is the most aggressive and speculative bearing a company can take, there is certainly every reason to believe the reverse merger narrative here in fact and the cannabis narrative here in principle.
Now commanding a market cap of $47.2M, DCGD has a relative clean bill of health as a shell, which is another reason to be interested here. Obviously, as with all such cases, the reality will be played out on the battlefield. But this is certainly worth watching on the pullback. We will update the story again as soon as developments transpire. Sign-up for continuing coverage on shares of $DCGD stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $DCGD, either long or short, and we have not been compensated for this article.