NEWBIES BOARD

[Garyst]

Nightly topic: Tonight is dilution. We hear so many times on the Boards that a company is diluting shares. Many will make that claim on the Boards almost anytime a Penny stock is trending down and many times it is not the case. Dilution is a company selling shares of their own company stock into the market. Basically there are two reasons they do so. One is to gain funds to further their endeavors. That is always a healthy thing and if done for that reason there should be no cause for concern. Some actually do it for that reason but they are few and far between. Where the concern usually comes in is that most out there do it for the opposite reason and that is to sell into the market when the pps is upticking and do not use the proceeds from those sales to do anything for the company. Basically take the money and run.

How can one tell if dilution is happening? Generally you will see at a given point a HUGE amount of volume come in. Lets say a Penny is trading 25 million shares thru the day consistently and all of a sudden there is a few trades that total say 75 million shares or more. That is usually a Flag that it is not the ordinary investor selling but rather the company "Dumping" shares. Another way to confirm dilution is to call the Company and many times their IR (Investor Relations Department) may say that the company did sell some shares. Many times they will give you the # to their transfer agent (TA) who oversees their sales of stock and the TA can usually state if the company sold shares. One glitch to this is that is the TA is "Gagged" which you may have read on Posts. That means that the company has ordered the TA to not give out information. That can sometimes put up a Flag but not in every case.

Tomorrow nights topic will be day trading rules and issues.