Hi Jazz,
Ive been reading the posts about the new shares offering, overall I dont think its a bad thing. I would rather see the company selling pre-defined units of shares at set prices than selling into the open market right now, or by entering into toxic finance packages with smaller investment bankers. Are you sure that you understand correctly where these new shares are coming from though? Because I'm certain that they are coming from the AS (Authorized Shares). New shares cannot come from the OS (Outstanding Shares) because these shares have already been issued and are owned by someone. Unless Mr. Greene is actually giving away his own personal shares, which I highly doubt, then this offering is going to be coming out of the AS. Just incase anyone doesnt quite understand the terminology, here it is in laymans terms.
- AS (Authorized Shares) is the maximum total number of shares that the company is allowed to issue (sell). A company is not allowed to exceed this number of shares issued unless it increases the AS.
-OS (Outstanding Shares) is the number of shares currently issued and owned by anybody. These include restricted shares. In our case the OS of 264,201,999 shares includes all outstanding shares (ie the 5% dividend shares, Mr.Greene's restricted shares, and of course the public free-trading float)
- The Float - These are freetrading (ie unrestricted) shares. In our case the 32,968,332 in the float are the normal, unrestricted shares owned by regular shareholders and insiders as well. Anything that is not restricted.
When a company issues new shares, that number is added to the OS and if they are restricted shares the FLOAT will not increase until those shares become unrestricted. If the newly issued shares are not restricted then both the OS and the FLOAT will increase. The AS will increase of course as well.
So unless Mr Greene is actually giving up his own personal shares as part of the 506 offering, then these shares when issued will increase the AS and the OS. Once the shares become unrestricted after 366 days, then the float will increase also.
The biggest red flag to any investor here is that 3 billion AS. That without a doubt is what causes the biggest concern to anyone who knows what they are doing. Many people take a look at the AS and actually use that to determine the value of a company (knowing if a company has an unusually large AS, that they are bound to use it). So in our instance an AS of 3 billion even at just the 1 cent PPS mark values the company at $30 million. At 5 cents PPS that gives us a value of $150 million.
This needs to come down if the long term PPS has a chance to recover. OS increase of 150million shares is no biggie imo, nor is the float increase by that level in a years time. If it gives the company the finance they need and they use it wisely, then I'm all for it. The AS is a big no-no here though.
AI
