Thanks Talonss! If he can do a PR clarifying the CD issue, how much is already converted and how mch is left, which one he is buying and when, that would help.
I guess my predcition would have been correct for the pps move to $1, without the conversion. However, the conversion doesn't make sense considering the fact the CEO is buying shares at $0.10. Why did he have to issue a CD for $50K, if he is willing to buy shares at $0.10 (par value)? The only explanation I can find is, the company was pretty much bankrupt unil Fanning & Co. came in and he didn't want to put his own money at that time. So he raised the money via a CD. Now that the game has changed he is putting his own money buying shares.
However, I must tell you that a VC deal is never done this way. When a VC comes in they clear out all the mess and start afresh. But then again VC's rarely invest in a penny stock.
btw- I don't buy the short theory because I have worked for 4years in Wallstreet and I know how and why short works. If the CEO is right about the 20M short- all that it means is the CD holder has given a blanket trade to a brokerage house to short so that he can give them the share to cover. Don't expect any squeeze. Until the convesion is all taken care, the pps is sadly in trouble. Once all the convesrion is taken care this will move big..IMO.
On the subject of short- It is big myth and here is why. The MM's and trading desk folks are people like you and me who work for a paycheck. If they mess up they will get fired. They make money on the spread and volume. Their primary goal is to create volume in any direction they can. Think of them as no different than day-traders whose goal is to close the book by market close. But they always can't do that so some of they remain long/short over night. However, they don't stay long/short for very long. Here is a situation, which happenes often in the pennyland why/how the MM can/do go short bigtime.
Let us say for example, a company/insiders/CD holders decides to sell 50M shares. They call the brokerage house, who in turn call the trading desk, who in turn make their MM aware of their intention. The seller will give direction on how to trade. For example, he can say I need to sell 10M shares a day no matter what. or can say sell as many as you can higher than $0.05 pps...etc. Or can say sell whatever you can without taking the pps down by more than 20%. The trading desk gives the direction to their MM and the MM keeps selling shares short the whole day. Generally, the MM will recieve that many shares by market close and creates a T-trade to balance the book. Because of the internet and messege boards t-trades can affect the volume negatively so the MM will try to avoid posting a t-trade. So these days the MM will keep short for few days to hide the fact from public and one of the days will simply create a "sell order" to himself during the market hours and close the short positions. He can take few days to close the short.
In summary no MM stays short to haras a company unless they already know that someone is willing to sell them shares. In this case, if there is 20M shares short by MM that means the CD holder will give that many shares to the MM to close his position. Contrary to popular beliefe/myth retail (you and I) can't short penny stock in USA markets. You can do so in Frankfur exchange, if the stock is traded there.
Experience is the most powerful tool in the world !
