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Gold/Mining/Energy : CMYN
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To: virginijus poshkus who wrote (562)4/4/1998 12:46:00 PM
From: FuzzFace  Read Replies (2) of 811
 
< they definitely can be sued if they withheld the information on the conversion>

They did not withhold it, but who knew what to look for? It was buried in a bunch of legalese. I couldn't even understand it when I finally found it. Since every company puts out reports that have equally incomprehensible sections in them, what hope does the individual investor have of uncovering these kinds of things? I guess that is why small cap is languishing and big cap is king. People are tired of being screwed by this kind of thing and figure big cap companies are much safer, both because they aren't likely to have such financing problems to begin with, and there are too many eyes watching them if they try to pull a stunt like selling "death spiral" convertibles to finance operations. So we live and learn.

An idea. There should be a requirement for a special section in 10K's and 10Q's entitled "Unusual Risks" which would, in plain English, point out financial arrangements which add extraordinary risk to a company. One or two sentences would do, as long as it referenced the section with the full legalese. With standard terminology for each kind of risk.

E.g.
"Death Spiral Convertible Preferred Shares Issued" - see pp 359-466.
"Mafia Loan Shark Long Term Debt Outstanding" - see microdot on p 781.
"Officer Stock Options Exceeding 5-Year Cash Flow" - see footnote on p 2699.
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