Wednesday, September 21, 2016 2:15:53 PM
I suspect they will want to reduce the OS via a reverse split at some point. The question is will they do it right away or wait.
Most reverse splits on the OTC are the result of death spiral toxic debt, where millions of shares are issued at discounts to cover operations and salaries, thus driving down the pps to low sub penny levels. It's the constant repetitive dilution that causes the share price to collapse, not the split. All splits are value neutral to shareholders but shareholders in most penny stock companies expect more dilution because those companies typically have no revenue and need to issue more shares to stay alive.
That is not the situation here. Malecon is an established company with a 41 year history of operations. They have a current revenue stream of at least $1 to $2.4 million per year from their brick and mortar pharmacy and we have no idea of how much revenue is being produced by their online specialty pharmacy operation, which could easily double or triple that estimate.
Malecon now has roughly 120,000,000 shares they can sell or use as collateral for notes or loans without dilution before they give up their 50% voting control of the company. Unlike most startups and all MJ sector companies, as an established company they will have little problem getting bank loans. They could issues shares if they wanted to acquire another specialty pharmacy, hospital, clinic or other health care business, but that would only add value to their shares and would not be considered dilution.
Definition of Dilution
To use a home analogy, if you own a home and take out a second mortgage to pay your medical bills you've decreased your net worth, but if you use that second mortgage to buy a rental property you've increased your net worth. It's the same principle here. In the first case you need the loan to stay alive. In the second case you're growing your wealth/value.
Les
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