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Microcap & Penny Stocks : UNIVERSAL EXPRESS INC - USXP -- Ignore unavailable to you. Want to Upgrade?

To: jmt who wrote (521)	7/1/1998 9:33:00 AM
From: TraderGreg	Read Replies (2) \| Respond to of 2493

JMT--I agree with you. It should not be permissable to do a reverse split and keep the authorized the same( or only slightly reduced). Unfortunately, that is how it's done. Think about it. Why else do stocks tank so much after a reverse is announced? Sure, instead of doing a reverse, they could just vote to increase the shares to stratospheric levels. Why don't companies do that instead? Because that requires disclosure and then often times a vote and then filings to the SEC to register those shares. Reverse splits can be announced after the bell!!, though usually an hour or more of notice is given. Say a company had 99 million shares outstanding and 100 million authorized and they needed/wanted to issue another 100 million, but they only owned 30 million shares themselves. If they called for a proxy vote to increase the authorized to say 400 million, there's a decent chance it would be rejected, not to mention the time it would take. However, if they called a meeting of the board and voted a 1 for 50 reverse in the morning, it could take effect the very next day. Now there would be 1,980,000 shares out. They could then print their desired shares(2million post split instead of 100 million) at will. In practice, they would meter it out slowly. Maybe they wanted to do an acquisition or two. With the authorized still at 100 million, they could do five or ten acquisitions now. The street knows this kind of crap happens and that is what makes the reverse such a bad thing. Go look at news on CVIA back a few months when they announced the 1 for 300 reverse. That release will refer to a reduction in the authorized but it sure as hell ain't 1/300 of what it was. I wish the SEC would require them to reduce the authorized by the same proportion. It's just that the ones I've been in sure haven't done it...and that includes PKGP/USXP. They now have 1 to 1.5 million outstanding and I guarantee you that the current authorized is not 1/70th of the prior authorized. 'Cause that number was only 50 million. TG