Replies to post #16251 on Cytodyn Inc (CYDY)

[trding]

From what i see, whenever a RS is done. The price ends up falling back down to what it was before the split. That's a scary thing to vote for.

Yes, RS is are always bad for shareholder expect in a few rare cases. Here is the math explaining why:


Suppose 150M OS at .75 share price and do a 10:1 RS.

Market cap before RS, 150M *.75= $113M
Market cap after RS, 15M *7.5 =$113M

Great everything is same, but the reason a RS needs to be done is that the company has diluted to the point where to dilute further then need to reduce the bloated OS.

So, in most cases, the company will continue to dilute for operating cash, say for example sake 15M shares over the next two years. Why would they request to RS unless they need to dilute otherwise, because again the market cap would be the same either way.

Two years later: Market cap $113M, OS 30M, equals, $3.75 share price, i.e. the shareholders before the RS are down 50% pre-RS.

CYDY is much better at slowly diluting then many other OTC stocks. Many companies will end up two years later with the same OS 150M post RS as was before, which makes the new share price equal to .75 post RS. This is why a RS is great for the company, with a much smaller OS, financing becomes much easier, but bad for old shareholders. Also most have dilutive financing self-adjusting to the current share price, which is terrible for sp, allowing the financing agent to dump the price lower and lower, grabbing more and more shares, having the OS ending up the same 2 or 3 months after the RS. DRYS is the worst for this, they are doing a RS each month, diluting, RS, diluting RS, over and over.


Also, some will say the RS will help with manipulation, since there are fewer share, but I'm in another OTC stock with 25M float that is still heavily heavily manipulated.

A rare case is if the company was diluting before the RS, but no longer needs to dilute because the have revenue now and are also uplisting off OTC, so they need to get the share price up to qualify. That is a rare exception a RS might be successful (to old shareholders).


Having a pre-approved RS in the board's back pocket until August 2018 would help with the one situation where someone is trying a hostile takeover, allowing them to RS the majority holders shares back under 50% before the vote can be denied next August 2018. But to get the majority, they would have to push the share price higher. Even with this benefit, I feel the harm of a RS out-ways the benefit. It will more than likely get approved as it has over the last several years, and if approved there is a good change they will continue to wait, but I probably will vote "no" anyway.


I'm saving my vote until the day before to see if any news between now and then changes my mind on any of the items.