Intellect Neurosciences Inc. (fka ILNS)

[Barney Vissur]

The dilution at ILNS is staggering, although hardly surprising. It looks as though debt holders are converting to common en masse, and the only reasonable explanation for that is obviously to sell their stock.

ILNS will file for bankruptcy protection from creditors in my opinion, and since ILNS reports little or no assets (and since their intellectual properties are tied to other people's patents) it won't matter at all to common stock holders.

That's a contradiction in analysis. In a BK, the debtholders have a preferred right to any potential value (including any potential lawsuit proceeds) in the company over the common stockholders. Historically, convertible debtholders usually convert to common if they see the potential of a spike in price and SEC rules normally require a 6 month holding period before they can sell their common shares. Otherwise, they are better off holding debt so any potential value in the company is theirs and the common shareholders are screwed in a BK. So, strategically, if your thoughts are correct that they are going to file for BK, the convertible debtholders should retain their debt positions, not converting to common.