No, they became a penny stock, in my opinion, because of a foul bear attack, which took already public information in many cases in their financial filings and tried to scandalize it. The result was very little legally in terms of those “revelations”, minor things, but the reality was it undermined them and then the attack was also directed at their largest investor. Which is a common tactic. Together, those things drove the price down and when they did their next financing, the bears I am sure did the attack for this reason though they of course never mentioned it, the considerable amount of most favored nation funding that they were given via their manufacturer, Cognate, on very friendly terms, was triggered, and that generated a huge issuance of shares and massive dilution. MFN clauses like that are like a piñata to bears, they know if you trigger a substantial drop in price, at the right time, you can cause an ongoing spill of dilution that accelerated a stock decline often catastrophically. And that is what they did.
I realize many retailers might not understand that is what was going on. They might have thought most of the claims could be real, but not much came of any of the claims. Virtually nothing. What did happen was the price was collapsed ultimately to .14, and that made some people a lot of money.
But the thing is, a lot of hedge fund traders keep those positions in place to avoid having a transaction that triggers a tax bill. They can borrow on these deep in the money positions and use the money to create even more wealth.
Unless the stock goes up again.
And the company chose to delist, they would have had other options, except that the most favored nations (mfn) clause had triggered their issuance of so many more shares to ensure that the financings continued to, in a shares for dollar cost measure, remained the same, that they were prohibited by NASDAQ from diluting more for a limited period of time by a rule that applies to everyone, but at that stage they needed to keep finding their operations, so they decided that in order to raise more funds they had to leave the NASDAQ and go to the OTC. Moreover, in that context then, a reverse split was not necessary.
So that is some extra detail on how they actually ended up a penny stock. Triggering MFN clauses is a specialty of some traders I suspect, as I have seen it before.
