I think Mr Chu is going to loose his shirt just like every other common shareholder. This CEO seems to be using the same death spiral toxic financing methods that Magna (Joshua Sason) is famous for. (Remember the Bloomberg article on Joshua Sason?)
Here is what I think the CEO is currently doing (All speculation of course):
1) After getting rid of all the negative asset values (9 ships) and negotiating debt forgiveness with the banks he now has only one problem left and that is the 920,000 outstanding preferred shares (PAR value of $25 with 9% annual accrued dividend). He currently owns approx 200,000 preferred shares himself which he originally paid %5 Million for and raised 18 Million from other investors. Those investors now own the remaining 720K. Box Ships owes $900K in accrued dividends to the CEO and 3.2 Million to public investors. He is now in the process of contacting all large preferred shareholders trying to convince them to convert their preferred shares to the common using a convertible note (see SEC filing from July 2017). He offers them $3.90 per preferred share and allows them to convert to the common at a 40% discount to the lowest trading price of the previous 21 days. Using this method, he pays worthless shares and gets rid of the outstanding obligation. If all preferred investors take this deal, there will be over 676 Million outstanding shares in the common which would mean that the price of the common will eventually go down to 0.0001. (Assuming it stays at the current Market Cap)
2) If he manages to convince all Preferred Shareholders to convert to the worthless common, he will then be the only preferred shareholder that is left in the company with his stake of 200K shares.
3) In the meantime Mr. Chu will only hold a tiny fraction of the outstanding shares with little or no voting power.
4) At the end of the death financing cycle (which will be near the last expiration date of the last conversion note), our CEO will then buy back controlling interest of the common shares for next to nothing. He will then be the majority common shareholder and the only preferred shareholder.
5) Once he has controlling interest and all preferred shareholder are bought off, he has 0 obligation and 0 debt left (except the one owed to him) Now he will be very motivated to get back into the shipping business. He now has the option to either merge with Allseas/Paragon or just acquire news ships once the market for shipping has recovered. The preferred will jump back to $25. A Win Win situation for the CEO and a loose loose situation for everybody else.
6) This strategy may actually work unless the SEC or a any class action lawsuit will put an end to these practices.
AI
