September 18 after market, we will have only convertible preferred shares 1 for 250 until they get their deal done and reconvert the preferred to common shares. That means after Sep 18, we won’t be able to trade our shares and this will be frozen to 6% $15 prefd. Stock. This means the share value will be frozen for the time being @0.06/share ($15/250=$0.06) like estate planning. They will also give 1 such preferred Stock ($15) for every 5,000 shares on Sep 1 as a bonus.
Question is what’s the benefit if it is locked at 0.06/share? Let’s assume post merger the stock price of new company is $3/share. If they give us 10 shares for 1 preferred, the value will be $30 for 1 preferred, which means it will double your investment pre Sep 18. There is a catch. If on Sep 18, the stock price is 20c and you still get 1 prefd for 250 common, that means you’re getting @0.06/share, not 20c per share. So you’re losing. The only way it will be beneficial if post merger they convert the preferred for common at a higher ratio and the stock price is much higher at the time.
Quote:
“The Company wishes to announce today that it has approved two actions for its existing loyal shareholders as well as new prospective shareholders. Both these actions involve the new Series C Convertible Preferred Stock. The first is a dividend to all shareholders of record on September 18, 2020 at the close of the market. For every 5,000 shares of common stock then owned, each shareholder will receive one (1) Series C Convertible Preferred share. This equates to a 5% one-time dividend for any shareholder of record for every 5,000 shares owned. The second item the Company has authorized is a tender offer for all common shareholders of record on the same date.
This tender offer is envisioned to benefit our loyal long term shareholders by providing them a way to earn an annual rate of 6% on their investments as they wait for our Company to achieve all the success we believe we will. The way to do this is by exchanging your common shares for the new Series C Convertible Preferred stock. That conversion rate will be one (1) share of the new Preferred for every 250 shares of common owned.“
AI
