Peter, If you really have a letter from a broker telling you they wanted to reduce the float in any company by holding your stock, I would be very concerned. First of all in most circles, what you described may very well be called stock manipulation. It is true about it affecting the price. Which would you want to do if the price goes up? Be holding unrestriced shares, or have your shares being held for you by a broker or the company which you could not trade?
Second, you need to ask yourself what you will get/do if they don't pay any or all of the interest on this note. Is the note secured by anything tangible of value? My guess is that you will end up getting paid interest in paper (read additional stock).
Third, when you get you stock back @ $.09/share (it will of course be adjusted for the reverse split), it will probably be restriced stock which will fall under the 144/145 rules. You may very well have to wait a period of time (as much as a year) to sell it. Sound good?
I doubt we will see a 1 for 10 reverse since there are only 60mil shares authorized. A 1-10 would reduce it down to 6 million authorized which is a very low amount. I would think a 1 for 3 would be more workable in terms of #'s of shares, although it would not give you much in the way of a market price (about $.30).
I should have looked at the float before I started writing this because another way they could do the split would be very bad IMHO. Let's say half the stock is in the float and half is in the treasury. If the company does a 1-10 on the float (outstanding shares) the 30 mil would go down to 3 mil with a street price of about $1.00 assuming $.10/share prior to the reverse. If they left the treasury stock alone, there would still be 30 mil shares left unissued. In this case the ownership of the shareholders would go from 50% to 9.1%. Doesn't sound too good does it? On top of that, the shares held in the treasury, at least initially, would be worth $30 mil until they began selling/using it. It would be very hard for management not to be tempted to use the treasury shares to generate $'s. As you might guess, it wouldn't take long for your $1.00 stock to lose it's value.
Let's hope they are smarter than that. Then again...
I understand they are filling orders and have a $4 mil phased in line of available cash. Hopefully things are looking up. |
