Thanks mick and the others that have given me a ping back on posting up that info.
I think Carlcarlos has started a great board here with you others helping him out. This topic of "toxic debt" is mega important I think and highly misunderstood by most in the OTC markets.
"toxic" aka "convertible debt" is a highly misunderstood and often under the radar key underpinning of the penny stock markets (OTC) that many, many investors or even traders just know nothing about. One of the best kept, "bad secrets" on ole Wall Street IMO. You can see how even the Bloomberg piece was sorta a revelation to the financial press people and the interviewer- they really couldn't quite grasp how the guy, Josh Sason of Magna did what he did or how it even works, etc
Notice also- that even the people who do the "toxic lending" (Magna, Sason per the article), after they've made their $MILLIONS, they all seem to be divesting off into other businesses with their fortunes, like even they know it's a "shady" area at best and they don't want to do it forever, at the risk of the SEC or others coming after them. Notice how the Kramer brothers are now doing movie financing of all things and then the Bloomberg piece specifically describing how the Magna guy, Sason, is diversifying now, getting out of making most of his money in this sort of "dark world" of convertible debt financing- and he seemed to run one of the tightest ships of them all, meaning he figured out all the legalities, and makes companies file share registration statements, dot all i's and cross all t's, he incorporated in Texas, as they're lenient to this type of lending, etc. Incredible- make a fortune CRUSHING companies and common shares into the dirt- then go and fund movie making and recording artists of all things with your fortunes, LOL !
The other guys who have gotten busted so far - the SEC or whoever caught um as they were getting just too greedy it seems, as in openly shorting stocks they said they wouldn't during the loan deal, using off-shore accounts to sell and drive the price down to help them convert more shares aka increasing the "death spiral" and all the rest of it. That Bloomberg piece is fascinating to say the least- I've re-read it and re-watched that video about 10 times already. It's a golden nugget of financial journalism to me.
But those of us who finally somehow managed to "figure this out" one day- we all know it's been nothing new really. This stuff has existed going way back- with of course Asher and some other notorious names paving the way.
Most of us got crushed or creamed probably back in the day on some stock position- unable to figure out why or how, no matter what the company did, it's common shares just got plastered into the dirt. Until perhaps, one day, at a place like I-HUB here, maybe we stumbled on to that term "toxic debt" or "death spiral" and did some reading and started to figure out what was happening.
I can't tell how many times I see a post like, "WHAT is happening to the shares, the news has been great but they just keep getting plastered down, lower and lower. Does anyone have a clue why or what's happening?"
I can then scan the 10-Q or 10-K filing of the company in question- probably taking literally about 2 minutes using a browser word search tool and tell right away if the company is doing toxic debt deals, dilution deals.
If they are- then my answer to the person is LOOK AT THE TOXIC FINANCING and then the DILUTION RATE and there's your answer. Case closed. NO amount of retail buying (anything short or miracle level buying) will typically be able to overcome the dilution forces and the specific MM's (market makers) that move in on a stock- once it's in "convertible debt" mode.
Maybe later when I get a little time- I'll write a post about "dilution MM's" and how they typically "do what they do" and common signs to look for on the Level II. There's good articles and research about it out on the web- under the "death spiral" category. How these dilution lenders usually have their own pro trading desks or a pro trading desk they use across town or whatever- and then certain MM's (market makers) they then make use of to do their shorting or price "capping" etc. One of the most common examples- would be a stock where the price keeps declining during use of convertible, toxic debt/dilution- and every single day some MM shows up on the Ask/sell-side and parks a 10K share block (like $100 bucks worth or some small size share order) on the Ask, all day, every day. And no matter how many shares trade or are bought or whatever- that 10K share block just never seems to get bought out or bought up, but sits there all day, all week, and it sets a "price cap" as the dilution boys are driving down the price- often shorting it or selling their "tranches" or legs down during share conversion. That's one example.
Yeah, the Bloomberg piece was fantastic. The left column of the article page, literally has the chart/graph explanation of the "spiral" and how it works. I think it's one of the first times I think I've ever seen a major, highly reputable financial press crack the lid open to reveal this toxic, convertible debt financing stuff. Which is amazing- it's coming up more and more on the SEC radar and now the financial press mainstream discussions- maybe cause of the "Wolf Of Wall Street" movie triggering some interest in boiler rooms and similar dark areas of the penny stock world.
Knowing more, being better educated about how things work, now to read 10-K filings (NO, they're not just "boiler plate" mumbo jumbo like so many often claim), knowing what and how dilution works- it's just better for anyone risking their money in the markets IMO.
