With all the talk about dilution and the company selling stock to cover operational expenses I have some questions. First and foremost would be how this conversion is taking place? As far as I know it is illegal for a company to sell what amounts to treasury stock on the open market. That said, the law does not prevent officers and employees from selling stock but there are restrictions. The most common and we'll know is that any holder of 5% or more must report any open market sale. As there has not been any report or filing of a 4K the stock must be coming from somewhere else and a holder(s) of less than 5% AND the proceeds cannot go back to the company. That would be an illegal conversion and non arms length sale. This is not a practice uncommon to non-reporting companies and being non-reporting keeps them under the radar. That doesn't make it legal though.
The first red flag I see with reference to this is Bodie. The investment aside, the amount of stock received was clearly met the need for a filing and what was reported was obviously erroneous? Intentional? I would think so because it was so far off.
The second red flag is the huge dilution and number of shares flooding into the market over the last eight or so. What was the source? It had to be either directly through the company, an employee/insider or through a private placement. Now there is another possibility. The company could sell stock through a n outsider or nominee. This is highly illegal (see U.S v. DiMauro, U.S. V. Pensley).
The bottom line is there seems to be no method by which the company could legally convert treasury stock. Section 504 is very clear as to what a company and management can and can't do and the filing requirements for 4ks is equally clear. I just cat figure out how these 200 million plus shares (almost 400 million since the "rebirth") came to be or we're made open market unrestricted shares let alone with the company as a beneficiary of the proceeds in many legal way. Maybe someone can clear this up?
This brings me to one more point. I didn't think much of the Bodie case until considering the above. Just he said she said BS with an unhappy investor. But my thinking has changed. Having re-read the complaint there are a lot of problems for Marani as it relates to transactions and conversions. Not that Bodie is directly involved or affected but discovery could very possibly expose some very questionable deals the company made not as to the actual conversion prices but the actual legality of those transactions.
