First Liberty Power (fka FLPC)

[nordicroots]

Watching a few other commodity stocks similarly start to flame out due to their exposure to convertible debentures (short term notes). Companies in a liquidity crunch might be inclined to borrow from these financers (some might call them loan sharks) short term and the way they seem to structure the notes if they don't pay back the cash with interest when due the notes become convertible to stock but usually at a healthy discount to current market price (usually spelled out in the agreement but have seen some will have 60% discount to share price). Unfortunately these never seem to be one shot and done events so the first time they dump all the shares on the market the SP drops and if there is a second tranche coming afterwards (say days or weeks later) then the diluted stock base and lower price impacts the price of the next batch to be converted. They call this crap death spiral financing for a reason. If the dopes running the company don't put a floor under the conversion price or insist on some reasonable staged conversion timetable (i.e. not immediate) these loan sharks (er.. I mean financers) can clean up and dilute the original shareholders into the dark reaches of nothingness in a heck of a hurry. And to my way of thinking if they are in cahoots with someone who is willing to work separately to short the heck out of the stock during a particular period of time that coincides with their convertible notes conversion, the damage to the orignal shareholders can be magnified immensely.

In my opinion convertible debentures in this manner are less preferable than a traditional secondary stock offering at least from the viewpoint of a shareholder who faces dilution of his ownership stake in the company per the original share structure.

To figure out how bad this has really been and how much worse it will get we (someone on this board) will need to go back to the 10Qs, scour it and dig up all we can on the disclosure of the convertibles and the schedule for their conversions.