This thread exists for the dissemination of news about new issuances of the species of convertible debentures, especially reg. S, that pose the threat of extraordinary ownership dilution for shareholders of the issuing company. Such debt issuances are rarely, if ever, heralded in advance, as are regular corporate debt sales; but are instead kept secret and only reported weeks later when the issuer is legally obligated to file an 8-K statement with the SEC disclosing the passage of a significant corporate development. The waiting period for converting such debt is conventionally just several months at which time equity is issued in an amount both inversely proportional to and at a significant discount from the market price.
The new shares are usually re-sold immediately in the aftermarket, often causing a cataclysmic supply side imbalance forcing the stock price to plummet. Anticipating this potential overhang, market participants in the know, so to speak, invariably begin shorting the stock as soon as the issuance is discovered. The aftermath of this activity often results in a crippled stock price and unexpected and disastrous dilution for common shareholders. In providing a forum for the notification of such debt issuances, this thread's creator hopes to advantage all virtuous market participants, especially individual investors who otherwise might be the last to learn which corporations have engaged in the sale of this perilous form of debt, and thus to help democratize the market for the common good. |
