That is very interesting.
You are right about one thing for sure, many small companies and many honest investors have been hurt by these deals.
I sincerely hope that the SEC looks into them, and the legality of the deals are challenged in the courts, as some companies seem to be doing.
I truly believe that the debenture holders are at the very least "strongly bending" the rules...when they short a company to the ground on the basis of their holding of convertible or restricted stock.
There has to be a limit on the amount of shares they can convert into, where they can make an honest profit, and not kill the company or as you say "rob" from the shareholders.
Someone suggested to me a few days ago on this thread that "the money is not free". Well I never suggested such a thing. But when people represent themselves to a company as "good guys", and suggest they are "trying to help" a company by purchasing a debenture and "loaning" a company money at a "reasonable" rate, so it can expand, or pay off bank debt or some other reasonable purpose, and then turn around and short the stock and attempt to run the company into the ground, I believe some sort of fraud has been committed.
I have researched several of these "deals" lately, and some have resulted in the debenture holders basically doing a "hostile takeover" of a company, or actually owning up to as much as 49% of a companies depressed stock. I have heard comments from a lawyer from a unnamed specific company that does these deals comment "It hurts us just as much when the companies price is depressed, as we sometimes own a significant portion of stock after we convert." What they fail to mention is the fact that they shorted the stock all the way to the depressed levels, pocketed huge profits from unsuspecting investors in the process....they then hold huge amounts of cheap converted shares, which they dump on other unsuspecting investors when they do a promote of the stock or other such deal.
This is definately something that needs to be looked into by the SEC.
And in my opinion it either needs to be stopped, or the rules have to be changed.
Sincerely
Lee
Edit and PS: I believe the call you received was a bunch of bull...It is my opinion that the "heat" a few people are putting on these guys are making them worry about their livelyhood, and that some are worried that they are going to find a "real" job. |
