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Microcap & Penny Stocks : OILEX (OLEX) -- Ignore unavailable to you. Want to Upgrade?

To: OFW who wrote (2457)	1/12/1998 10:02:00 PM
From: Marty Rubin	Read Replies (2) \| Respond to of 4276

8. Watch out for reverse splits! Here's how a reverse stock split works. A company's stock currently trades at $1. The company implements a one-for-five reverse split. Every five shares of pre-split stock becomes one share. The investor, who had previously held 1,000 shares, now owns 200 shares of the post-split stock. The new stock price immediately after the split is $5. The market value of the position, before and after the split, is $1,000. What could be wrong about that? Because when such a reverse split takes place, it's often a glaring indication that all is not well at the company. True, the shareholder does not suffer a loss of asset value or dilution of ownership value. But this equality is usually very temporary. When a company undertakes a standard stock split, things are usually going well. The business operations are profitable and growing, and the shares are moving steadily upward. Such is almost never the case for the company implementing a reverse split. Pure and simple, reverse splits are facilitated to improve the appearance of the company and its stock price. The company whose stock is $5 appears more valuable than one whose stock is merely $1. But if the company really believed in its future and wanted to reduce its amount of outstanding shares, it would start to buy them from the market. Furthermore, the stock is now ripe for a secondary offering of more shares by the company. For the pre-split shareholder, his percentage ownership in the company will endure a magnified degree of dilution the moment the new shares hit the market. The company's objective for the share offering has yielded the desired capital, but the risk has been transferred to the shareholders. It makes no monetary difference to the company. (Exact quote from stockdetective.com --------------------------------------------------------------------- I can say I'm certain they will raise the authorize shares to 100 million or 100,000,000 shares. No one should expect them to have "only" 2.5M shares. I'm mad as hell -MR

To: OFW who wrote (2457)	1/12/1998 10:11:00 PM
From: Marty Rubin	Respond to of 4276

Offie, I'm deeply sorry for calling your question about the background of the man behind the $2M founding irrelevant. I hope I didn't offend you. MR ---------------------------------------------------------------------- 9. Watch out for Regulation S abuses! Regulation S is a section of the federal law that permits publicly-traded companies to sell unregistered securities to overseas investors. These "overseas" investors, in some cases, are actually U.S. investors operating through offshore shell companies, often hedging their investments by using options or short sales. That's particularly true when the issuers are risky small-cap companies, which sometimes turn to Reg offerings out to sheer desperation for cash. In the past, these Reg S securities could be issued to the "overseas" investors and then sold back into the US market before the existing shareholders even found out it. But the SEC realized that this was a problem and recently changed the rules. A company that issues Reg S securities now must file a Form 8-K within 15 days of its occurrence. Because Reg S securities are currently restricted for 40 days after they are issued, existing shareholders will be warned about Reg S deals before the shares can be sold. However, purchasers of Reg S securities can still short the stock before the 40 days are up, and later use the Reg S shares to cover their short position. Therefore, existing shareholders can get hurt by Reg S offerings even under the new rules. The most dangerous kind of Reg S offerings for existing shareholders are convertible securities which can be converted into common stock at a fraction of the stock price at the time of conversion. For example, the securities might convert into common stock at 75% of the average bid price over the previous five trading days. No matter how low the stock price falls, the Reg S investors can still convert into common stock at a price lower than the current stock price. And the lower the stock price falls, the more shares they get. Therefore, they benefit from the dropping stock price and will often even short the stock to help it fall further (and lock in higher sale prices of the stock as well), then cover their short position with the shares they get from conversion. They almost can't lose! The existing shareholders, however, are usually big losers when this happens. This type of Reg S offering will frequently cause a massive increase in shares outstanding, which means that existing shareholders now own a smaller piece of the company and hold shares that are worth much less han they were before. Watch out for all Reg S offerings, but especially watch out for this type of Reg S!