22nd Century Group Inc (XXII)

[linuspop]

I have a take on it, but I could be wrong.

Financing deal: 6 million shares issued to an "institutional investor" for $1 per each share. They pay $6 million for the 6 million shares and, as an added perk, XXII grants them 3 million warrants, if exercised, for $1.25 each, effective in 6 months and expiring in 66 months.

Short interest raises leading up to the offering announcement, as the finance partners know they can push the price down once the registration effective, buying long shares for $1 while also make money by shorting shares sold above $1 via a different (maybe offshore) account..and make money on both the long end and short end of the $1 financing. So sell some or all of the long $1 shares, even at a loss if they are making money on the short end, and be left with free option to purchase warrant at only $1.25 in the event that the stock rockets to, say, $10 in a year or two. That would be ~$9M in free money while they have largely re-couped their initial $6M investment.

Again, I could be wrong but XXII has been trading poorly on high volume since the registration became effective. If this is the case, its a shame we get used in such a way. However, at the end of the day, Henry got the $6M capital to get us marketing Red Sun and submitting Brand A to the FDA, etc, and the high volume helps to move the seller along his way at a fast rate. May be a limited opportunity to add if the games dry up soon.