Acqua Wellington: Part II
I posted last week that short interest in the first half of January doubled to well over 700,000 shares. I also suggested that it's very likely this increase, two periods in a row, is corellated to another financing through Paradigm. This time, likely in the 80 cent range.
Why do I suppose this is the case? Easy. Consider the first two weeks of October 2003, when shorts increased by 219K. This was largest single increase in DMX shorts in the past 5 years. From October 15-31, shorts increased another 1,447,524. Then, October 22, 2003, Dimethaid's $14 million financing with Paradigm was announced.
Coincidence? Certainly NOT. Paradigm was aware they were participating in the placement well before it was announced to the public. They also knew the price would be $1.00, therefore any short initiated over $1.00 was guaranteed profit.
By December 15, 2003, when the warrants were exercisable, the short position was reduced by over 2.3 million shares, bringing the balance down to almost zero. This was simply the shorts being covered by the newly minted shares. It was the big cash-out.
So, back to normal trading, right? Not a chance. RK loses the Provalis arbitration to the maximum and she has not planned for it. She now needs to go back to the well.
What does she do? Simple, she calls up Paradigm and says she needs to do another round. 700k shorts added in the last two weeks of December and first two weeks of January, tell the story. Is this starting to sound familiar to those who have been around DMX a long time? Remember the word "drawdown"? That nasty word that became synonymous with DMX's old friend, Acqua Wellington. Well that seems to appropriate word to describe RK's new relationship with Paradigm.
Our new relationship with Paradigm is nothing more than an equity line of credit, just as we had with AW. RK made the point of telling us at the 2003 AGM that the TSE had banned financings of the AW sort, obviously (though she did not say this) because the AW form of financing resulted in death spirals where each successive financing (drawdown) spawned heavy shorting and a subsequent lower share price for the next drawdown. It was essentially a recipe for death if the company kept drawing - eventually the stock would be shorted in to pennies.
Each financing with Paradigm may not be officially called and equity line of credit, but that's exactly what it is in reality. Paradigm will keep giving Dimethaid money, but only at a significant discount to market. This ensures they can hedge the necessary amount of shares and make a guaranteed profit without holding a single day. Of course each time RK goes to them, the price is lower as a result of prior bashing the stock took because of the earlier shorting, and this subsequently means brutal dilution, as the cost of the money becomes greater and greater.
RK has taken this company from one form of death spiral financing to another. She has learned nothing from past experience shows no sign that she understands the peril she has put the company in.
As I mentioned, I expect another round of financing from Paradigm in the next 2-3 weeks. I can only hope the BOD will come to their senses and stop this immediately. If our BOD acts as they should, they can create a huge short squeeze here of proportions not seen before in DMX's history. Of course that would mean stopping the financing in its tracks and removing RK from the CEO job immediately.
No matter how you slice this debacle, there is no argument I can conceive of to keep RK as CEO. Rebecca must go now!
joe
FYI, DMX shorts back to May 2001.
Short History for DMX
Symbol Exch Report Date Volume Change
DMX T 2004-01-15 702,800 350,900
DMX T 2003-12-31 351,900 302,100
DMX T 2003-12-15 49,800 -2,357,250
DMX T 2003-11-30 2,407,050 1,265,426
DMX T 2003-11-15 1,141,624 -305,900
DMX T 2003-10-31 1,447,524 1,080,300
DMX T 2003-10-15 367,224 219,200
DMX T 2003-09-30 148,024 -26,000
DMX T 2003-09-15 174,024 8,258
DMX T 2003-08-31 165,766 -30,200
DMX T 2003-08-15 195,966 18,066
DMX T 2003-07-31 177,900 -1,500
DMX T 2003-07-15 179,400 3,900
DMX T 2003-06-30 175,500 -4,000
DMX T 2003-06-15 179,500 -38,900
DMX T 2003-05-31 218,400 -6,000
DMX T 2003-05-15 224,400 -12,500
DMX T 2003-04-30 236,900 -291,700
DMX T 2003-04-15 528,600 195,900
DMX T 2003-03-31 332,700 179,200
DMX T 2003-03-15 153,500 9,000
DMX T 2003-02-28 144,500 1,100
DMX T 2003-02-15 143,400 -9,900
DMX T 2003-01-31 153,300 23,800
DMX T 2003-01-15 129,500 -7,500
DMX T 2002-12-31 137,000 -14,500
DMX T 2002-12-15 151,500 71,600
DMX T 2002-11-30 79,900 -5,500
DMX T 2002-11-15 85,400 0
DMX T 2002-10-31 85,400 -51,261
DMX T 2002-10-15 136,661 7,100
DMX T 2002-09-30 129,561 -83,846
DMX T 2002-09-15 213,407 90,253
DMX T 2002-08-31 123,154 -13,400
DMX T 2002-08-15 136,554 -24,190
DMX T 2002-07-31 160,744 0
DMX T 2002-07-15 160,744 11,500
DMX T 2002-06-30 149,244 4,267
DMX T 2002-06-15 144,977 -1,411
DMX T 2002-05-31 146,388 -8,189
DMX T 2002-05-21 154,577 19,493
DMX T 2002-05-15 154,577 19,493
DMX T 2002-04-30 135,084 0
DMX T 2002-04-15 135,084 -400
DMX T 2002-03-31 135,484 946
DMX T 2002-03-15 134,538 -791
DMX T 2002-02-28 135,329 20,693
DMX T 2002-02-15 114,636 24,115
DMX T 2002-01-31 90,521 -2,100
DMX T 2002-01-15 92,621 3,700
DMX T 2001-12-31 88,921 -1,977
DMX T 2001-12-15 90,898 9
DMX T 2001-11-30 90,889 6,200
DMX T 2001-11-15 84,689 -10,850
DMX T 2001-10-31 95,539 47,660
DMX T 2001-10-15 47,879 -18,192
DMX T 2001-09-30 66,071 9,400
DMX T 2001-09-15 56,671 -100
DMX T 2001-08-31 56,771 5,000
DMX T 2001-08-15 51,771 -4,832
DMX T 2001-07-31 56,603 4,042
DMX T 2001-07-15 52,561 -8,000
DMX T 2001-06-30 60,561 -16,397
DMX T 2001-06-20 76,958 -1,702
DMX T 2001-06-15 76,958 -1,702
DMX T 2001-05-31 78,660 -12,009
DMX T 2001-05-15 90,669 19,552 |
