Death Spiral and Ghost Busters

[Dragon Lady]

An excellent Bloomberg financial journalism piece on one of the most notorious "toxic" finance houses to ever exist- even surpassing ASHER fame IMO, MAGNA:

http://www.bloomberg.com/news/articles/2015-03-12/josh-sason-made-millions-from-penny-stock-financing

For an example- check out the stock Bioheart, BHRT and when it did its Magna deal, almost always done as a combination "toxic note" and then they, Magna, sell the company their "enhanced equity line" deal, a sort of credit line facility that the company can "tap" and make draws on over time. In BHRT's case it was a $205K note with a $305K "face value" due, then they inked a $3 million over 24 month "credit line" all with this Josh Sason guy of MAGNA.

Since that Magna deal- BHRT just hit an all, all, all time low of .0046 cents on mega volume exceeding 20 MILLION shares traded that day. It was a 2 cent or more stock not that long ago.

Bioheart, BHRT also has done deals with Asher, KBM Worldwide, Daniel James, Fourth Man and a new hedge/toxic lender named "Vis Vires" group to name a few. These are all floorless, "toxic", convertible debt deals with very steep share discounts- such as 45% to 47% and 8% or more interest.

These are known as "lenders of last resort" and nearly always end up being share price crushers. BHRT has diluted out over 300 MILLION shares in approx the past 1 yr period and then already 65 MILLION more shares before the 1st 3 months of 2015 were even over. A more than doubling of their outstanding share count in 1 yr. The BOD upped their available shares (A/S) count to 2 BILLION from a previous 950 MILLION, as they know they're going to dilute at an ever accelerating pace.

Once on the mass dilution train: the toxic, death spiral train- a nano cap, cash poor company can rarely get off it according to all research including the SEC itself, and they essentially become just share dilution machines, issuing literally 10's and 10's of millions of more shares on-going, never ending for all intents and purposes. The lower the price goes, the more share that must be issued- thus the "death spiral" as it just spirals in on itself.

http://www.sec.gov/answers/convertibles.htm

http://en.wikipedia.org/wiki/Death_spiral_financing

http://seekingalpha.com/article/760021-a123-systems-an-object-lesson-in-toxic-financing

http://www.investingadvisers.com/finance/articles/the_mysterious_world_of_death_spiral_finance.php