Kraig Biocraft Laboratories Inc (KBLB)

[sojomy]

This is what I worry about...

Offering Price and Size
In a non-dilutive offering in which shares are offered at current market value, there should theoretically be no effect on stock price. However, in a dilutive offering, the share price that a secondary offering is made at has a significant effect on the price of existing shares.

The least disruptive scenario is when a company offers the new shares at a value that accounts for the current market value minus a discount for the expected dilution effect. However, if a company offers shares at a further discount, it can sharply drive down the price of a stock as buyers will refuse to pay more than the price of the secondary offering until after the offering is made. Even after the offering is executed, the price of the stock will be lower than dilution can account for since traders who bought during the offering can sell at below the pre-offering market price and still make a profit.

The size of the offering – that is, the number of shares being offered – amplifies these effects. If the offering is small relative to the number of outstanding shares, the dilution and the effect of discounted pricing will similarly be small. On the other hand, if the offering is large, the price dilution effect will be significant and any discount in the offering price can have a significant effect on market value.

KBLB & Maxim will set the price of the offering, but they have to make it lower than the post-r/s price, or no one will buy it. How much lower is up to them, but they're also trying to time it with a r/s, where the ratio will probably be determined 10 days before the offering. They may get it right, they may severely blow it.

Why wouldn't they just announce the r/s, wait for it to take effect, and then price the offering near the current post-r/s price. I don't think the r/s alone would hurt the share price, especially when it's in conjunction with up-listing to the NASDAQ, which would no doubt bring in new investors / traders - I'm not assuming Buffet-like investors, just lots more home investors, and maybe small firms, or small buys from bigger firms. A 30:1 r/s brings the stock to $5, and still allows 28.5 million shares of liquidity. I'm guessing there would be enough hype, at least initially, to increase the share price at least 50%. Even a total share sale of $23 million at $7.50/share only adds 3 million new shares, or 10% dilution of shares.

I know all of this is assumptions & possibilities.