Longwei Petroleum (fka LPIH)

[GorillaGorilla]

The diluted share count has remained the same since the financing in Oct 2009 - this financing while being poorly managed, they would not be the first Chinese company to have this happen, is the reason that they have doubled their revenue in the year not a disaster by any means! You take every share and every preferred and every warrant and convert them and you end up with 115M. Which is where we've been for a year.

The problem is that the 14M preferreds are/were convertable at $0.80 so the financiers have been doing just that keeping some and selling others at a hefty profit. Any share is a combination of supply and demand for the stock - these preferred convertables have increased the supply and kept the prices depressed. There are now only 3M of these as of 15th Nov.

The warrants is a different situation. They can either convert non-cash which means that at 2.60 - 7 warrants get converted into 1 share or with cash in which case LPH gets a boost to the balance sheet of $2.25 M for each 1M shares converted.

We recently heard that the owners have cashed in 2M shares at, think, $1.60. The ownership is very high and mutual funds prefer it if owners don't have in effect a majority of the votes - we hope that they sold them to reliable institutions but given their feckless-ness with shares I wouldn't be surprised if the buyer is now selling them on the market. We need to contact management about what they are up to in this regard (Turkey Friday probably not a good day). I would hope they could sell additional shares at a smaller discount to the market price!

Investing isn't rocket science there are a few things you need to be able to do and one of them is understand share counts, outstanding shares, diluted shares, prefferred and warrants - and you can get that information at investopedia. You need to look at the most recent 10-Q to get this information [1] and in particular look at the following and you can see where we are - Note9 is the state of play at 30 Sept and Note 13 takes you up until 15th Nov.

NOTE 9 – PREFERRED STOCK - OCTOBER 2009 FINANCING
NOTE 13 – SUBSEQUENT EVENTS

The good news is that the company is now doing 100s of thousands and sometimes millions of shares a day. It will work through this inventory. Go back a month or 2 and many days it would even do a 100K. The major reason for this is the value of the shares verses the earnings attracting more buyers. This is only going to increase in the coming year and indeed as the price declines.

This is a cheap share and the supply is limited. The only obvious increase in shares would now come if they were to buy / start a new facility which would once again increase revenues significantly.

rich

[1] http://www.sec.gov/Archives/edgar/data/1111817/000101376210002721/form10q.htm