IMO, Paul and Errol have placed themselves between a rock and a hard place by following the strategy of preferred shares to adjust their share structure rather than the straight forward path of an R/S. IMO, we have 3 groups of shareholders:
Group A Those who purchased stock prior to 12/31/08 and chose to go the preferred share route. This group now has about $1.8 million in common share buy back power. Note: the current market cap for 141 is essentially Zero so the conversion will drive the pps to 0.0001 or less IMO.. Also, on a post 1/175 split basis this group represents about 9 million shares.
Group B Those who purchased stock prior to 12/31/08 and chose not to go the preferred route. The had a 1/175 R/S in February. IMO, this split should never have happened if Paul/Errol felt that this Group was at risk of losing their equity. Also, this group represents about 13 million post split shares.
Group C Those who purchased stock in 2009, IMO most of it to support the recent dilution. Most of this stock was purchased post February R/S. IMO, this group represents about 12 million post split shares.
We are very close to the time that Group A can exercise their rights to reconvert back to common stock. So, what are 141's options at this point:
Option 1. Let it play out. IMO, the result will be that given a Zero market cap, the pps will be driven to 0.0001 or below and the result will be more than 18 billion common shares for this group. Further, it will essentially eliminate any equity held by groups B and C since they own only about 25 million shares combined. Also, 141 will have adjust their share structure with a R/S at some future date to meet their original objective.
Option 2. Build the market cap into the $4 to $6 million range in the next few days to drive the pps up above $0.10. This would take some blockbuster announcements and overcoming the disconnect that 141 has with the stock market. IMO, I don't see this happening. Too far to go and too little time.
Option 3. Delay the reconversion process by paperwork delays. Not a good strategy IMO and will only buy a limited amount of time.
Option 4. Announce a major forward split for Groups B and C in the next few days. This will drive the pps to 0.0001 but it is going there anyway IMO unless option 2 is followed. Follow this up with another major R/S in late April after Group A has an opportunity to reconvert. This will also give 141 some time to build the market cap through prs. I don't know if there is a limit on the number of splits a company can have in a given period of time. At the least, it would be embarassing.
Option 5 is some combination of the above options
My personal opinion is that I can't believe that any CEO would allow themselves to get into this position especially when they were warned on the front end. I also don't see any fairness in allowing Group A to wind up with 100% of the common stock equity when they only purchased 25% of the common stock (post split basis) given 141's history of non disclosure of information especially during the time period for chosing to go or not go the preferred conversion route.
Please do your own DD and good luck to you. Probably more to come on this issue.
