Spongetech Delivery Systems, Inc. (fka SPNGQ)

[FireTamer]

ATTENTION ALL NEWBIES AND THOSE DOING DD:
Please read this post from our beloved friend Dark Lady. Although we miss her, her insightful comments and posts are still available for our gleaning. This should help clear up the
"Perception of a Gagged TA"...enjoy..


Hi Gang,

It seems that there is some confusion, misunderstanding and lack of knowledge in reference to why the TA is gagged. I will lay it out once more. Save this for future reference.

The TA is gagged for basically two reasons, one in a positive sense and one in a negative sense. Let's take the negative one first.

NEGATIVE:
The company starts operations and issues one billion shares at .01. A small company, little or no assets, mostly an idea with a dream. Because new business owners seldom understand and realize what costs occur with a start up, the cash soon runs out. He/she goes to a financial institution and applies for a loan. With no credit history, no real sales and revenues, he/she is turned down. He decides to increase the total AS shares to two billion. Of course this depresses the share price to triple zero. Now the share price is .0008. This new income stream is soon used up. He/she must go into the market for additional money. They now realize that if they show the additional one billion shares that they want to issue the share price will be further depressed. So they call the TA and tell them to not give out any additional information concerning share totals. This is gagging the TA and occurs when the above scenario occurs. The company may continue to do this, over and over as cash runs out. With a gagged TA, it takes a person that can search out the situation, going through the SEC documents.

POSITIVE:
A company starts operations and issues one billion shares at .01. As with the above example the total picture in terms of costs are not fully understood or realized. They use up the available cash and must go into the market for additional capital. They issue an additional one billion shares and their share price also declines to .0008. However this company is different. They have a product with great potential and sales and revenues start to climb. They are increasing sales and revenues so fast that they need additional capital. They also lack the history to qualify for a traditional loan. They decide to increase the AS to four billion shares to provide the capital needed. The share price declines but not as much as the first example because of the fast increasing sales and revenues. However with the AS now at four billion they are now showing up on the radar of some unscrupulous people in off shore areas that run sophisticated computer programs that high light companies with certain attributes, high volume trading, high AS and relatively new in existence. These are seen as vulnerable, less sophisticated and more vulnerable to attack.

There goal it two fold. To create millions, some times five hundred million or more, of "air shares", shares that exist only in air. The second goal is to drive the share price down into triple zero and "cellar box" ( down to .0001) if possible. They then wait for the company to go out of business and cover at zero cost, or they contact the company and agree to cancel the short interest with a handsome pay off. Either way they come out a big winner.

How ever they sometimes run into a problem. the company being attacked continues to grown. Sales and revenues increase geometrically, profit increases at a fantastic rate. So now they are in trouble, what do they do? They can give up, try to cover to make the shares legitimate or attack relentlessly with further increase in air shares. Suppose they choose the later and issue five hundred million air shares to try to crush the stock.

The company responds by increasing the AS to three billion shares to be above the total of legitimate and air shares that are thought to exist. This give comfort to the NSS (naked short sellers), they assume that with the air shares and legitimate shares they are still below three billion. Now suppose this company starts to retire shares two or three hundred million, then another two or three hundred million. They keep doing this, of course announcing it to stay legal. So eventually they are below seven hundred million. They along the way give notice that the TA is now gagged. This is perfectly legal, many companies gag their TA. However this company is doing it to keep the OS value hidden from the NSS. Without this knowledge, every increase in air shares put the NSS at great risk. Soon the NSS exceeds the available OS. And then take from the OS the shares held by strong longs and we have a float that is down to maybe two hundred million, essentially gone.

Now assume this companys COO is a very intelligent businessman who understands the ploys of these nefarious individuals and plans the ultimate revenge. Suppose the COO plans and executes announcements that devastate the NSS, such as a merger at a very decent price. What if he announces that the float is gone, that the outstanding share float is around 200 million. What do you think the response of the NSS will be, since they and the American MM's that executed the trades have a legal obligation to make sure every share we have bought is legal and in our account? There could be a terrific squeeze as the NSS tries desperately to find legal shares to replace the air shares in everyones accounts. How hard the squeeze will depend upon how many they get to sell as the price rises. The smart investors may want to hold and make them pay the maximum

In the end the NSS is defeated and the share price will settle at a fair evaluation of the company's economic situation.

Take what you want from this and toss the rest.

Take Care,

Darklady