How Logical Fallacies Are Used Against Small Cap Companies
Last week I mentioned all that is wrong with the concept of having a stock market vigilante / mafioso, in an already over-regulated environment. I used AI asking “problems with vigilantes” to illustrate how the motivation of such self-proclaimed vigilantes can be conflicted and things can go wrong. Indeed, it is one of those “who guards the guardian?” situations. It is also a situation of how things can go terribly wrong when those who we trust, or those who claim to be acting in a charitable way, are in fact bad actors. Often this is only fond out too late. The recent history of the BBC has been and continues to be a good example, as the power of the corporation continues to be abused.
This week I am looking at the way that some small cap companies on the London market continued to defamed, bullied and harassed, largely as due to a lack of resources, they are only the ones where those attacking them are sure they cannot fight back. Interestingly enough, during the week I saw a reel on social media entitled “5 logical fallacies you must avoid”. As it turns out all of them are currently used on small cap companies, and to be fair, the wider market when bad actors have the bit between their feet. The 5 logical fallacies are as follows:
- Strawman Fallacy – distorting someone’s argument to make it easier to attack
- Ad Hominem – attacking a person instead of the argument
- Appeal to Authority – something is true just because an authority says it is
- False Dilemma – presenting two choices when more exist
- Slippery Slope – saying one step will cause a chain of disasters
What this reel taught me is that the 5 Logical Fallacies are what have been operating on the London stock market to undermine small caps, and of course unliked companies and people. This is the kind of prevailing environment that would make many who run private companies think they would need their heads examined if they were to get listed, let alone the cost, the red tape, and the Old Boy’s network / mafia.
Of course, the five point playbook is an effective one. Give someone a nickname, “Sleepy Joe” “Crooked Hilary”. “We expect to make a profit next year” becomes, “they will be lossmaking for at least another year.” “Appeal to Authority” becomes a “Letter to the FCA, AIM, Aquis.” It might as well be “SFO, SEC, or MI5”, the effect of intimidation is the same. And of course, how do we know that the authority in question has received the letter, has not ignored it, or things the complainent is a moron? That said, it would be even worse if there was some kind of symbiotic arrangement between the complainent and the authority in question.
As far as False Dilemma is concerned, not only does one see only two choices when more exist, one sees two false choices, ones that have nothing to do with each other. Slippery Slope is a classic: Rubbish Plc is losing £1m a month, at this rate it will have lost a £100m by the end of the decade, as if nothing would change in the meantime.
Ironically, the Appeal to Authority is my favourite, as in 50 years experience of both my parents or myself appealing to authorities, they have never helped, rarely answered and frequently put the blame back on me.
As I have stated in recent articles, and despite the recent Times article by Alex Ralph on the abuse of listed PLCs, nothing has been done to remedy the situation. Indeed, I see the bad actors becoming more and more brazen. This is disappointing to someone who has loved the stock market since they were a child, and always dreamed of being listed on it.
RKH Greenlights Falkland Sea Lion Field Development – Targets First Production By 2028
This Week’s Small Cap Highlights
Positive speculation regarding the opening up of the Atlantic margins as far as oil and gas discovery by the major, including the Falklands, was a feature of the week’s price action, Interest was understandably focused on the likes of Borders & Southern (BOR) and Rockhopper (RKH), but the winner by some margin proved to be Eco (Atlantic) (ECO), as it rose 77% on the week. Presumably having (Atlantic) in the name helped this process.
Clean Power Hydrogen (CPH2) was up 68% on the week, even though the last we officially heard from the company was that it was attending the Mello Event on November 19. I would recommend attending Mello, if only for attendees to experience what it was like to go to a 1970s style hotel, where the conference is held in Chiswick. That said, this event clearly helped CPH2.
Presumably, people were short up to the eyeballs in Bisichi (BISI) as live so many other companies who announce they are to delist, the shares went through the roof. Who says shorting helps the market? This phenomenon of massive rallies as stocks head for the exit really should be looked into.
I have bemoaned the way that Empyrean (EME) has the price action of “three fine days and a thunderstorm”, and although this week the shares were up 36% overall, it was a repeat of the typical story. But at least the rally was delivered in the wake the oil and gas development company with interests in China, Indonesia and the United States, announced its Interim Report for the six months ended 30 September 2025.
That said, I would argue that the overall small cap star of the week was one that has deserved to be more of a share price winner than it has thus far: East Star (EST). Here the Endeavor JV was certainly under-appreciated when first announced last month, even though it is a $25m plus affair. But this week’s EPC agreement for the development of Verkhuba was rather better appreciated, and underlines that EST is very much on its way.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.
