First and foremost, I'm a true long w/ NEOM. I think all of you know this or at least my previous posts have more than conveyed that. Anyway, this is an interesting read from someone who knows Cornell in and out. He/she will remain anonymous. Also, I STRONGLY believe w/ overwhelming conviction that NEOM falls in the 2% survival rate. You'll see what I mean.
Stay LONG & STRONG
-Boldini
Explanation on how Cornell works:
First Cornell's business model designed to kill stocks and companies. Statistically 98 out of every 100 companies who deal with Cornell go broke or to pink-scam-land. Only 2% survive.
Cornell buying stock – I think this is the greatest misconception of them all. Cornell NEVER has to buy stock when there's an Equity Line or SEDA agreement signed. CEO's place stock in an escrow account for Cornell to transact sells and raise cash for the company. They never buy stock, the company 'puts' stock to them, the transfer agent DTC's those 'put' certificates into the escrow account and the O/S then reflects the free-trading shares from the newly issued stock that's residing in the escrow account. CORNELL NEVER BUYS STOCK, THEY ONLY SELL…..And in all cases, THEY SHORT THAT ESCROW BOX.
Why does Cornell short the box? First, you must understand what that means. Most know but some don't. If one shorts without the cert in hand, it's a naked short. When one shorts a stock against the cert in hand (the cert in the escrow account in this situation) then they are covered shorting. Cornell is known to also naked short.
Covered Shorting (Boxed) and Naked Shorting
Cornell MUST ABSOLUTELY SHORT EVERY EQUITY LINE AND SEDA AGREEMENT. I'll show and tell you why. It's all about collateralization of the asset. A Loan To Value (LTV) ratio. Whenever you borrow, the lender has to protect the asset from a loss of value. Morgators demand you insure your home. Lenders demand you insure your car. Financiers demand your stock never loses value while the loan is outstanding. To protect themselves, financiers SHORT THE STOCK 100% OF THE TIME DURING THE DURATION OF THE OUTSTANDING LOAN.
Publicly traded finance involves lending money against the value of stock. Example: Stock = $10/share. Company files an SB-2 for 1,000,000 shares at the agreed upon valuation of $10/share. So they strike an Equity Line agreement for a million shares at ten bucks each, a $10 Million financing. Yahoo, the stock spikes. "We got financing, buy, buy, buy!"
The company starts to borrow on the equity line by issuing stock to the escrow account. Let's say the first tranche is for $100,000. The CEO calls the transfer agent and says to issue a Cert for 100,000 shares and DTC it electronically to the escrow account. Boom, the O/S just grew 100k shares. Cornell cuts the company a check and calls their broker/MM and shorts 100K shares of volume. The cert still stays in the escrow account and the cert is PROTECTED FROM A DOWN SIDE LOSS OF VALUE IF THE STOCK GOES DOWN. CORNELL IS PROTECTED FROM LOSS and they still control the cert.
Let's advance this 3 months. Let's now say the company has issued 300,000 shares at $10/share and now has 300,000 shares sitting in escrow account – ALL BOX SHORTED BY CORNELL, legally. BUT A FUNNY THING HAS HAPPENED, the stock price is no longer at $10, IT'S NOW $5. When one starts to add up the cash raised by the company you'd figure that they'd raised $3M from 300,000 shares, right? WRONG. As the stock price slides from an ever growing short position, it takes more dilutive financing shares to raise the same amount of money. You get on a treadmill. The faster you dilute, the lower your stock price goes. It becomes a shorter's dream. CORNELL CAN'T LOSE. ONLY THE SHAREHOLDER LOSES, AND EVERYTIME.
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