Seems to be some confusion on how things work. Whether they cancel the current stock certificates and issue new shares in a new common stock or whether the creditors just get newly issued shares (both common and convertible preferred) on top of the already outstanding shares, the result is the same. The current common stockholders as a whole will own 2% of the shares of common stock when you take into account the number of common stock shares that the preferred stock represents. The current stock price represents the value that the existing outstanding shares have, which would be just 2% of the valuation the company will have after the new shares get issued. This means that with a 1.2 cents stock price and 100,000,000 shares already outstanding before bankruptcy, the valuation of what will be 2% of the reorganized company is $1,200,000. This means it is valuing the company after the reorganization at $60,000,000.
Since we know the company coming out of reorganization has no assets to speak of and will simply be a reverse merger play, this means the stock is way overvalued and should be at least 90% below where it is today. Unless I missed it, the Disclosure Statement needs more information. It should say exactly what the number of shares of common stock are projected to be and the number of that related to the current shareholders (2% of the total). I saw some comments about it all depends on what they set the valuation of the new shares at. That doesn't happen. The stock market sets the valuation and right now it is setting an insane valuation that should drop be 90% when people start to do the math on this.
