The problem with an RS in OTC land is that people have no idea what it actually does. The reality is that it just splits up the pieces into different proportions of the same single pie.
It is like 50bil/50bil = 1
500mil/500mil is still = 1. That is ALL a RS does.
Here is the problem tho. With toxic debt, the lender shorts the stock in advance of getting their shares. Since the number of shares they get is based on a percentage of market value (often the lowest price over the last so many days). They drive the price down, holders panic and sell, causing the price to plummet. The lender then requests say $10k worth of stock at 70% of the lowest price they could manage. This gives the lender a lot more shares.
If they are able to get the price down to trips (like .0001), 70% discount is huge. The CEO panics and does a RS, but the toxic lender still has money owed, so the race to the bottom continues.
IF there was no longer toxic debt, a RS means very little negatively - except for people who are afraid of a RS and get on message boards trying to "teach" others how bad a RS will be. At the moment, an RS here would be bad because there is still toxic debt. It is only $500k worth, but until that is removed, we don't want an RS. Once that is gone, I wouldn't mind a RS at all. There are better ways to fix the share structure, but an RS would be a quick fix to SS.
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