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Gates Foundation Sues Petrobras, Auditor for Fraud
Source: Dow Jones News
RIO DE JANEIRO—The Bill and Melinda Gates Foundation is suing Brazil's Petró leo Brasileiro S.A and its auditor in a New York court, claiming a vast corruption scheme centered on the state-run oil company caused the charitable organization to lose tens of millions of dollars.
The foundation, started by the billionaire co-founder of Microsoft Corp. and his wife, joins a long list of plaintiffs seeking to recoup money as a result of the scandal that has hammered Petrobras shares. And it is just the latest bad news for the troubled oil company, which is scrambling to restore its reputation, rebuild investor confidence and pay down ballooning debt amid a global slump in oil prices.
Petrobras has long maintained that it was a victim of a yearslong bid-rigging and bribery ring that Brazilian prosecutors say was cooked up by suppliers and a few crooked insiders who fleeced the oil company for at least $2 billion.
But the Gates lawsuit, filed against Petrobras and the Brazilian unit of PricewaterhouseCoopers LLP or PwC, alleges that corruption at the oil company was so widespread as to be "institutional" and that the wrongdoing was "willfully ignored" by its auditor.
"The depth and breadth of the fraud within Petrobras is astounding. By Petrobras's own admission, the kickback scheme infected over $80 billion of its contracts, representing approximately one-third of its total assets," the lawsuit said. "Equally breathtaking is that the fraud went on for years under PwC's watch, who repeatedly endorsed the integrity of Petrobras' internal controls and financial reports. This is not a case of rogue actors. This is a case of institutional corruption, criminal conspiracy, and a massive fraud on the investing public."
The Gates Foundation filed the lawsuit late Thursday in the Southern District Court of New York. A co-plaintiff in the lawsuit is WGI Emerging Markets Fund, LLC, which managed investments for the Gates Foundation.
The plaintiffs didn't disclose how much they invested in Petrobras shares.
A spokesperson for Petrobras didn't respond to a request for comment. A spokesman for the Gates Foundation referred a request for comment to the Foundation's Trust, which didn't respond to the request. The other plaintiff, Boston-based Westwood Global Investments, didn't respond to requests for comment. PwC declined to comment.
More than a dozen lawsuits have been filed by U.S. investors who bought American depositary receipts sold by Petrobras in New York, including the attorney general of Ohio, public pension funds in Idaho and Hawaii, and the city of Providence, R.I.
In June, Petrobras wrote off some $17 billion to reflect losses because of corruption and inflated contracts. It is now scrambling to sell some $58 billion in assets through 2018 to raise cash and deal with a ballooning debt pile.
So far this year, Petrobras' credit ratings were downgraded to junk status by both Moody's Investors Service and Standard & Poor's Ratings Services.
Petrobras shares were down 1% Friday afternoon in New York.
The stock has fallen more than 44% this year, wiping out billions of dollars in shareholder value. In 2010, the company ranked among the top five biggest companies in the world, with market capitalization in excess of $220 billion. Now, the company's market cap is around $23 billion.
Prosecutors say that for at least a decade, some of Brazil's biggest construction firms formed a cartel to skim billions of dollars from Petrobras through inflated contracts, kicking back bribes to company insiders and politicians who helped them keep the scam going.
The investigation has resulted in more than 100 arrests and more than 30 convictions. Some of the accused have cooperated with authorities and turned state's evidence in exchange for lighter sentences. Others have drawn long prison terms, while still others maintain their innocence.
The Gates Foundation is a charity that distributes money to grantees working on everything from the eradication of polio to helping small coffee farmers.
The Foundation's Trust manages the group's $41 billion endowment.
Write to Will Connors at william.connors@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 25, 2015 16:15 ET (20:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
Imagine how practical such an acquisition that would for the guy that has to pay his full service brokerage their standard commission on the trade. Heck, even the discounted commissions at one of the discount brokerage firms would make such a trade totally unrealistic.
Isn't that where the speculation part of the investing equation comes into the picture? "IF" mgmt can overcome the odds and the company becomes a success the investor wins; on the other hand if they don't then the investor loses and those receiving paychecks and charging out for their expenses and professional fees for a little longer win the day.
OMG - you're right! According to wiki.fool.com they confirm same. This is not a good thing for legacy shareholders as normally asking for more authorized shares requires a vote, and I would prefer being given the right to weigh in on such a decision.
Here is what they have to say of reverse splits:
A reverse split lowers the number of shares outstanding. For example: if a company reverse splits its stock 1-for-2, it means the shareholders must turn in their certificates and receive new certificates evidencing ownership of half the previous number of shares. A shareholder who owns 1,000 shares pre-split will own 500 shares of the post-split stock. The total number of outstanding shares decreases but the total number of authorized shares doesn't change. If the company had 100 million authorized shares and 50 million shares issued and outstanding pre-split, it will have 25 million issued and outstanding shares post-split and 100 million shares authorized. Post-split, the company will have 75 million shares that can be issued in the future if needed to raise capital. Prior to the reverse split, this available number of authorized shares had been 50 million out of the total 100 million authorized. - See more at: http://wiki.fool.com/Does_a_Stock_Split_Impact_Authorized_Shares%3F#sthash.TvQQ3yMs.dpuf
If they do a reverse it also impacts AS. If they increase AS they will also need shareholder approval. Given where we are now bumping up against the ceiling limit of shares doesn't change with just the proposed RS.
MTO - I would like to see a vote on authorized shares as well. What happens in this area will be insightful in terms of telegraphing their intentions to shareholders don't you think? The split itself is meaningless as you have mentioned several times before it is nothing more than the way you slice up the whole pizza pie.
By proposing a 100 for 1 reverse split they will not overcome the problem of running up to the limit of authorized shares. By enacting a reverse split of 100 for 1 they also effectively reduce the authorized shares at the same time down to 30 million. And if they find they bumped g against the ceiling of authorized shares already, the reverse split proposal by itself does not help them. Seems they need to do both if they need to do the reverse split for the sake of selling more notes to the loan sharks.
Good summary. What can also occur in this process is that the share price can sink so low that the shareholder is trapped and cannot get out. By this I mean to suggest that when small fry shareholders sit on their shares hoping it recovers someday, they may find that the price drops so substantially that they cannot recoup enough of their capital to warrant even paying their brokerage firm's commissions to sell the shares, so unless they want to throw more good money after bad to jettison the investment that proves to be a dud, then they are stuck with the shares in their account forever. At some point it may go 'no bid' and no longer maintains any sort of listing on any of the exchanges. I've been stung by a few over the years and at that point they don't even have a symbol associated with the stock - they simply get listed in the account by a number and a "0" value. At some point the typical investor will want to recognize the loss in some way - most often it becomes a loss used against a capital gain to reduce taxes owed.
I think you are recalling some info related to King's Environmental Impact Assessment (EIA) find where is said they would begin the activities that would support the actual drilling. These are the pre-spud activities such as clearing roads to access the site, site prep and other related support activities. Such efforts are usually considered pre-mobilization efforts as the drilling rig doesn't actually start turning the drill bit until they are able to roll up onto a prepared site, set
up the rig ("rig up") and actually begin by putting the drill bit in the earth and start rotating it. I got the impression the actual drilling is scheduled to begin in 2016.
By specifying "annual" it would seem to me that this would serve to indicate the stated intent for the frequency at which it will be held. By focusing on the date determined by resolution of the board you seem to wish to give them a pass to interpret what sort of frequency for an "annual" meeting would be appropriate. In other words if they wanted to decide for themselves that an annual meeting was appropriate once every 5 years for example, that would be OK simply because they resolved to hold it at such intervals. My thinking is that by not sticking to the annual frequency as denoted by the term "annual" they are not adhering to either the spirit or intent of that provision.
Now whether it is simply a matter of avoiding the cost of holding such a meeting that would seem to be something of a different matter. If we explore that a little, I would observe that many small companies will opt for smaller meetings at low key/low cost locations and avoid spending all sorts of money on "extras" like the full color annual reports that although distributed by some of the larger companies in the industry as a matter of standard practice. Doing annual meetings the wrong way can introduce some additional cost burdens that the smaller players cannot reasonably shoulder and shareholders usually look favorably on such cost consciousness and management determination to avoid unnecessary costs. So in those instances I don't think it would not be out of line to expect at least a barebones meeting with minimal expenses wrapped up in preparing reports and handouts. And preferably to be held according to a date scheduled at the board's choosing - but at least annually.
I will digress for a moment to recount something that influenced me greatly as a teenager watching my relatives invest their hard earned money. One aunt in particular (she made investing her hobby and later her primary means of income) was pretty vocal in expressing her views with the management of the companies she invested in - especially if they could not turn a reliable stream of profits. I recall times she was pretty critical of them for wasting shareholder capital on fancy color printed materials when they could simply print the reports on newsprint at a much lower cost. She did have the ability to influence those she entrusted her capital to and if the company management team could not grasp what their responsibilities were she would fire them. For a small investor it meant either voting them out such that they were literally fired from their positions or she would sell the shares and find a better management team that could be relied on to provide the business performance necessary to ensure reasonable shareholder returns. She was a very sharp woman - may she rest in peace.
Could be a very simple explanation. Perhaps he has kids of college age and he would prefer to invest his money in his greatest legacy - his children. There are times in life when cash crunches - like expensive university costs for one or more children - can get in the way of other plans. At times like this even if you identified something out there as a screaming deal, such commitments might just take priority until those obligations are completed. Of course it is hard to say as everyone's circumstances are different, but it is important not to read too much into things like this as you can quickly arrive at the wrong conclusion based on something that is totally unrelated.
I think in the context he was referring "EIA" would be "environmental impact assessment."
Sorry - Can't agree.
You said "First, lets agree, the CEO does not work for the shareholders, they work for the company owners and or directors."
You entirely missed the point that the company owners ARE the shareholders. We might be able to agree that everyone has a boss(or bosses) and is accountable in the line management chain of command - but it is very important that everyone understands this very basic concept.
Krom - You are showing your age...
Basically just 3 outcomes for shareholders re the shell company:
1) Benefit shareholders
2) Hurt shareholders
3) No effect on shareholders
We can use our imaginations as to scenarios that could lead to any of those 3 outcomes but we really won't know until we know how they plan to use it.
Exactly - and you are right on target regarding their common interests here. The economies of both countries (Russia & KSA) are very dependent upon oil and the higher the prices the more goes into government coffers to operate their respective budgets.
Mad - and therein lies the quandary for some here. You say just trade. But for some, that is not really part of the longer term agenda. I suspect many of the comments you are referring to are from long term investors. A lot of us have lost tremendous sums of capital but remain optimistic about the company's prospects based on the assets it holds. And yes, for many pursuing the 25 bagger you describe would be extremely exciting, but for many it would not begin to be sufficient to get back to even (or the plus side for that matter) to overcome the dilution we've seen, unless there was significant position management and dollar cost averaging down much lower. For someone who had already lost 90% + of their capital in this issue, it meant taking a huge leap of faith, holding one's nose to get past the stinky situation and committing a lot more money to this investment.
I heard a saying once that the difference between a trader and an investor is that the investor is the one who failed to move quick enough on a "trade" and is forced to sit on it for a while in order for his "investment" to turn around. It takes all kinds to make a market and in this stock we have both traders and investors - and what you are seeing are many of the various perspectives coming through in the comments - and for some who are incredibly frustrated at this point, such comments are a really necessary relief valve that allows them to vent and blow off some steam - so please be patient with us. It will continue to be interesting that's for sure! Enjoy your July 4th holiday.
I guess we'll have to see how things pan out. I know the Saudis are not so thrilled with the US at the moment - particularly this administration. My understanding is that shortly after a visit by the Sec. of State in late 2014 the decision was made in the Thanksgiving day OPEC meeting to keep production output steady and then they lowered prices to accomplish this. In previous OPEC meetings where Russia was invited to sit like a fly on the wall, they were a bit put off when Russia failed to fall in line with the direction the cartel was headed. I think this is intended to resolve some of those issues, but if it changes beyond that in terms of military or economic ties it could have a tremendous impact on the very petro-dollar that the entire industry is tied to. So as far as these things are concerned I think it is a bit more than fluff. You saw in the article that Chris DeHammer was projecting oil prices up around $75 bucks a barrel by year end, I have heard a lot of the same in other circles too. In any event, should some of these things pan out and result in oil prices rising, we will see small cap oil stocks get a bit of a boost.
Speculation on oil prices - might just have a positive impact on demand for oil stocks. A lot of those smaller cap stocks that got hammered as KSA dropped the boom on oil prices could do an about face pretty quickly, even those that are in the exploration phase of the company life cycle like this little explorer ERHC.
Here is an article that discusses a recent visit arranged between the Russians and the Saudis. It will be interesting to watch this play out as we move closer to drilling in Kenya.
http://finance.yahoo.com/news/saudi-arabia-leaving-u-behind-215428719.html
Don't forget its summer and a lot of traders are out on holidays. And on top of that we have all the multiple perceived crisis' unraveling simultaneously with Greece, Puerto Rico and China. As a result, just about the entire market is sort of soft right now. Is it any wonder that you are not seeing flocks of buyers here or anywhere else for that matter?
IMO what is more important at this juncture is that there really are not a lot of sellers of ERHC stock.
When markets are experiencing periods of distress or uncertainty professional money managers often simply hit the eject button and bail out. They dump now and ask questions later. And in many instances they end up jumping out of stocks where there is some value left that they can liquidate to raise capital so they can come back and live to fight the battle another day. The guys that are down 90% plus at this point may not be so anxious to liquidate this stock in particular and might just be content to wait and see what happens. But on the other hand, they might be inclined to sell their Exxon or Chevron holdings to raise cash (coincidentally both tickers seem to be down some 9% over the last month) and be prepared to jump back in once the dust settles and the coast looks clear again.
Didn't we read that one or more of the directors in the new NGAR shell had some sort of past/present ties to Oando and didn't another have ties to Exile at some point? I thought I recalled reading something like that in the prospectus or one of the other filings that there were already links posted for earlier.
To reinforce your point, it is also important to look at the players and how they are professionally connected. When making deals it is not just what you know but who you know that can make a difference.
"Seems a lot of things aren't important to them." I am guessing you might also want to include all the pesky "shareholders" in this list?!
They may be feeling the heat for the Canadian shell, but at the end of the day they will likely just counter any criticism by observing that they did it in an open and transparent manner which is all a matter of public record. And as Krom so frequently notes, they are slow to issue the PRs through the Company until all the "i"s are dotted and the "t"s are crossed and everything is essentially a done deal. And from what I can see, until they figure out precisely just what they are going to do there is really nothing material to issue a release for. Keep this in mind, they did not hide it (the shell) as others might (for a high profile case, think Enron and Jeffrey Skilling, who went to prison for his special purpose entities and other sleight of hand accounting tricks/schemes) by putting the Enron special purpose entities in the name of their wives or cousins or best friends or whomever. These guys used their own names and contact information and as I mentioned - it DID become a matter of public record.
And as far as us even being able to talk about it like this, all I can say is it is a real credit to King that he did his DD and that he was able to share it with all of us so we are not completely in the dark.
I like it. Now let's focus more on your scenario 1 for a moment.
Did you happen to pick up on this as you reviewed the prospectus on NGAR?
Sylvan Odobulu, Director
Mr. Odobulu (age 54) has served as Vice President of ERHC Energy Inc., a United States based company with oil
and gas assets in Sub-Saharan Africa from July 2007 to present. Mr. Odobulu is responsible for identifying and
developing new Sub-Saharan African indigenous upstream oil and gas interests and business opportunities through
mergers and acquisitions. He played a leadership role in executing the successful Production Sharing Contract
negotiations of ERHC’s portfolio assets in the Republic of Chad. He is experienced in local acquisition activities,
management of government stakeholders and the integration of all development exploration activities at the regional
level. He was a Supervisor at Ernst & Young from September 1999 to March 2006. He has been a member of the
Society for Mining, Metallurgy and Exploration since April 2011 and a member of the Association of International
Petroleum Negotiators since November 2010. He received a BSc and an Accounting Degree from the University of
North Texas in 1993.
It will be interesting to see what they do with it.
I found a few interesting publications that I think are worth sharing with the board. After taking the time to read and digest, it might be worth some discussion:
Working Paper from Harvard Business School:
http://www.hbs.edu/faculty/Publication%20Files/12-089_42a5328b-f99c-426e-8d59-985c63fa3bb0.pdf
"In summary, the evidence supports the existence of strategic mimicry, which the capital market did not fully discern for many years. It also supports the explanatory power of reputational bonding to explain the fact that adoption of U.S. institutions can be used either to build reputation or to exploit relatively weak U.S. cross-border law enforcement."
Client advisory – Carter Ledyard & Milburn LLP
Read the whole thing...
http://www.clm.com/publication.cfm?ID=24
Business Insider article
http://www.businessinsider.com/sec-in-massive-probe-of-chinese-reverse-mergers-that-have-cost-investors-billions-2010-12
"Reverse mergers -- sometimes called reverse takeovers, or RTOs -- are perfectly legal in the U.S., and have been used in the past to give birth to solid public companies, including the parent company of the New York Stock Exchange itself. If there is a flaw in the process, the flaw is that it allows stock manipulators to circumvent regulatory scrutiny."
Interesting development. Maybe just working to establish some sort of follow up to to that mysterious MOU by the IOC which was PR'd by ERHC before the onslaught of CDs. You know - the one that just expired without a word. Certainly something worth watching closely. I have to wonder about the shell's holdings (or future holdings for that matter).
Do you mean following VFIN around to other stocks? Where else are they playing this game?
I think you are correct on every point you just made. I agree with you wholeheartedly on the sentiment regarding the Obama administration. And as for your thoughts on the politics of the price of oil and the two governments lets just say that a lot of folks found it an interesting coincidence that John Kerry made a very quick trip to Riyadh last year (the visit made the papers in KSA) and within a very short time there seemed to be some things put in motion that very much aligns with what you are saying - including the decision around Thanksgiving to lower pricing to their Far East customers while keeping output steady - much to the chagrin of other OPEC members.
And yes, like many others here, I'm sure hoping it all works out in favor of those long on this board!
But that is exactly the point isn't it? With the current economic situation and the world sitting on the edge of a "new" recession, demand is not heading higher and prices are not what they were to justify extraction of the higher cost tight oil. All we need to do is look to the output in the Bakken and other shale formations. Their break even costs are higher than the current market for numerous wells. No real reason to put more of those wells onstream unless there weas an economic reason to do so as they are not profitable. That was one of the side effects of the Saudis lowering oil prices.
Regarding your comments on the "oil glut" Keep in mind that it will be very interesting to see how that bigger picture plays out and what if any impacts it will have on those that do end up making commercial discoveries and booking new reserves. The oil glut is going away soon...
http://www.worldoil.com/news/2015/5/23/oil-s-whodunit-moment-coming-with-millions-of-barrels-to-vanish
The RS in and of itself has no real significance as MTO has observed before. The percentage each has as ownership stays the same - you are just cutting up the pizza into different sized slices. There are many instances of a company doing a reverse split for the sake of maintaining a share price above a certain threshold to meet stock exchange listing requirements (e.g., NYSE) but the exchange this thing is traded on obviously doesn't have this same sort of requirement as one of the larger exchanges so it should not be an issue.
The danger with a RS as we talk about here appears when someone decides to throw an increase in the authorized outstanding shares into the mix - these are two distinctly separate actions and even though the company asserts that one goes hand in hand with the other this is not a given in every circumstance. When these two are combined together we have the potential for even more dilution than we have already seen and this is why some on this board so strongly oppose the idea of one. Many feel there has already been way too much dilution on legacy shareholders.
I guess that is the thing to focus on. They put forth the assertion that the RS goes hand in hand with keeping AS the same. But to do this effectively means increasing the AS and this is something shareholders have s right to vote on. And another thing, just because they assert these two things commonly go together like this doesn't mean it's a given. Some companies only do the reverse split to raise the share price to meet exchange listing requirements - not to give the green light to further dilute.
Keep in mind that if you are already bumping up against the maximum limit of authorized shares, simply doing a reverse split won't help as the reverse also reduces the authorized shares accordingly as well. So if there is more room needed to issue more shares it will require an increase in the number of authorized shares - and that would require a shareholder vote if I am not mistaken.
Speaking of his conversion - would it be possible for him to convert through a direct private placement at a specific stated value per share of say $1 per share and if this followed an announcement that the company was done with the CDs with this final conversion how do you think that would affect the shares of those traded on the exchange? Something like this would signal that a major investor has faith in the value of his shares representing his (large) stake in the company and he'd be seen paying for in a properly reported transaction. Perhaps if he had a lot of foresight he might also make a public statement to indicate he would be making more open market transactions to acquire more shares over the next two years on the strength of his faith in the management team to successfully navigate through the efforts involved with bringing us through drilling in 2016. What sort of impact would this have on the situation? My thoughts would be that it sure would be good for the shares that he currently holds wouldn't it?
Questions on reverse splits from ERHC FAQ page:
Reading the company’s thoughts on considering a reverse split I noted the following:
http://erhc.com/faq/
Q: Is the company considering a reverse split to raise the price of the stock?
The company continues to review all options at this time.
Q: If a reverse split was done would the number of shares the company can issue (currently 3 billion) also be adjusted downward to reflect the split?
Usually, when a reverse stock split is done, companies might elect to keep the number of shares they are authorized to issue at the same amount. Thus, if a company were authorized to issue 1 million shares and before a split had issued 500,000, then carries out a 500:1 split, the shares it can issue will still remain 1 million while the issued shares after the split are then only 1,000.
What caught my eye was the part highlighted of the answer given. This tells us a little more about their line of thinking and it goes beyond just the possibility of a reverse split – which by itself really has no meaningful impact on the company’s worth in terms of market capitalization (think back to the example MTO gave earlier of the way the pizza gets sliced up). What is sort of important in this line of thinking, as they present it, is that in one breath they acknowledge how a reverse split works yet in the next they are tossing out the idea that even though technically a reverse split would also reduce the number of authorized shares commensurately by the ratio of the reverse split – they sort of indicate their desire to ignore that factor by inserting an additional thought of an increase in authorized shares into the mix without coming right out and the words directly, i.e., specifically calling it an increase in authorized shares; made with the reference in this very smooth, simple and well crafted passage - “companies might elect to keep the number of shares that are authorized to at the same amount.” Almost makes it sound like these two things belong together naturally as though it is quite common and not really a big deal.
What concerns me is that this could suggest that if they were to propose a reverse split, they might also at the same time be inclined to subtly increase the authorized shares by leaving it the same at 3 billion #. These are of course two distinctly separate and tremendously important issues.
That would give them a lot more room to further dilute current shareholders even more than they already have wouldn’t it? Even if the RS were not put to a shareholder vote, at the very least I think that such a move with respect to the AS would require a shareholder vote. Anyone had any experience in situations where the shareholders rejected a management proposal to increase authorized shares under such circumstances?
Here is a write up on splits in the Investopedia website in case anyone wants to read more:
http://www.investopedia.com/articles/01/072501.asp
Or he could always just willingly, out of the goodness of his heart (and of course in his own self-interest) convert his shares at some price significantly higher than they now trade - converting fewer shares would present the possibility of coming in below that A/S number and require neither. He knows the value of the shares and the company's potential doesn't he?
Heck - he could have sent it but it might just have ended up in your junk mail folder!
I'd sort of have to respectfully disagree with the thought that it is a lot of hot air about nothing. With regards to the issue of share structure, there is a lot at stake from multiple perspectives with possible impacts on a number of us on this board. Accurate and reliable information is critical and some might suggest that it needs to be better than a guesstimate when it is their reputation and capital on the line.
When changes in share structure occur rapidly it can affect the trigger for filing the SEC Forms 3, 4, and/or 5. If an individual were to rely on only quarterly filings he/she may either file unnecessarily or risk failing to file on a timely basis or even miss the required filing completely, depending on what his understanding of the outstanding shares may be at a given moment. Getting it wrong can result in civil and or criminal penalties for those very souls that are intent on supporting and helping the management to recapitalize the company through purchase of the newly minted shares as the CDs are converted. So in essence, any one of us could get slapped pretty hard for simply believing in the company management team and buying more shares at a time when we might perceive them to be undervalued. And in fact, with management not being transparent in the share structure in real time, it is difficult to assess whether the company is over or under valued as Krom has mentioned already; many investors will reply on an assessment of total market capitalization to properly determine this as they evaluate company ownership for investment purposes.
So as I see it, relying on the older outstanding share data could result in any one of us making an unnecessary filing, but on the other hand, not knowing how many new shares are actually being minted could also result in overpaying for these new shares as well. Both outcomes can represent something of a dilemma for any one of us.
I don't like the thought of the management team not being transparent to the point that it puts the individual shareholder at risk of civil and criminal charges brought by the SEC just because they were going along with management's obvious recapitalization efforts by putting fresh capital up to soak up the new shares in such a way that helps ensure this company makes it to the drilling slated for 2016.
While some may be content waiting for the next quarterly filing by the company, some individual investors may be put behind the eight ball without adequate information on current share structure just so they can determine whether they hit certain thresholds in ownership of outstanding shares and thus determine that they are then obligated to file these forms on a timely basis. Of course this will depend largely on how much and how quickly they are soaking up new shares (against the backdrop of the actual shares outstanding), and this trigger event is something that could certainly take place well before the next quarterly filing.
According to the SEC instruction form for FORM 3
Disclosure of information specified on this form is mandatory. The information will be used for the primary purpose of disclosing the holdings of directors, officers, and beneficial owners of registered companies. Information disclosed will be a matter of public record and available for inspection by members
of the public. The Commission can use it in investigations or litigation involving the federal securities
laws or other civil, criminal, or regulatory statutes or provisions, as well as for referral to other govern-
mental authorities and self-regulatory organizations. Failure to disclose required information may result
in civil or criminal action against persons involved for violations of the federal securities laws and rules.
According to the SEC instruction form for FORM 4
"Disclosure of information specified on this Form is mandatory. The information will be used for the primary
purpose of disclosing the transactions and holdings of directors, officers, and beneficial owners of registered
companies. Information disclosed will be a matter of public record and available for inspection by members of
the public. The Commission can use it in investigations or litigation involving the federal securities laws or other
civil, criminal, or regulatory statutes or provisions, as well as for referral to other governmental authorities and
self-regulatory organizations. Failure to disclose required information may result in civil or criminal action
against persons involved for violations of the Federal securities laws and rules."
Who must file? Per FORM 3 instructions
"(ii) any beneficial owner of greater than 10% of a class of equity securities registered under Section 12 of the
Exchange Act, as determined by voting or investment control over the securities pursuant to Rule 16a-1(a)(l) (“ten percent
holder”)"
When must the form be filed? Again per the FORM 3 instructions
"(a) This Form must be filed within 10 days after the event by which the person becomes a reporting person (
i.e., officer, director, ten percent holder or other person)."
Per Form 4 filing (from Fast Answers on 3,4 and 5 link provided below)
"Changes in ownership are reported on Form 4 and must be reported to the SEC within two business days."
https://www.sec.gov/about/forms/form3data.pdf
[https://www.sec.gov/about/forms/form4data.pdf
https://www.sec.gov/about/forms/form4.pdf
http://www.sec.gov/answers/form345.htm
http://en.wikipedia.org/wiki/SEC_filing
Thanks for the effort. I'm sure it will be very important to a large number here. Particularly those intent on making any necessary filings in a timely basis.??
I would think knowing the exact number of shares outstanding would be a critical piece of information for those who could be subject to SEC reporting if their dilution insurance purchases push them over the reporting threshold in terms of key percentage thresholds.
Isn't the opposite side of this coin worth examining as well? The focus of the question was one that only looked at the lower price allowing accumulation of more shares. Isn't it also possible that his conversion could be at significantly higher prices? Sure it might mean less shares for the conversion but it would also assure greater restoration of his existing share holdings in terms of establishing the current "market" price that essentially everyone uses as a means of having these assets "marked to market."