It also works against the behavior-driven investor, as described by Mei, Wu, and Zhou (2004). A larger spread gives irrational traders pause on selling (this comes from Kahneman and Tversky's prospect theory, for which they one the Nobel in Economics). Behavior driven traders are less willing to sell losers than to sell winners. Here's a link to Mei, Wu, and Zhou's paper:
Their paper doesn't address dilution by the company, but you could lump them in with the manipulators, as they would dump shares during a price spike. I think old-schooler is aware of the case involving a founder of I-Hub that fits into this model (no, o-s was not involved).
So, how does HNSS fit in? It is a prime candidate for a pump and dump, but the incentive to try such a scheme is lessened by evidence of an increase in shares, whether from shorts or dilution. Someone with deep pockets, who tries a pump and dump may find that that they do the pump, while the company is doing a big dump.
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