Replies to post #217594 on Kraig Biocraft Laboratories Inc (KBLB)

[sojomy]

After a 100:1 RS the stock price would immediately be 100 times current price, or $16.25 at the current price of the stock. Why in the world would KBLB set an offering price at $4.25 if the stock price is $16.25?

The offering price of the secondary sale of shares is not correlated to the stock price. They may try to choose a r/s ratio to get the post-r/s price in the range of the offering price (currently a 25:1 to 37:1), but they actually could do a 100:1 r/s (which puts the post-r/s price at $16.50 currently) and still do an offering price of $4.25. They're trying to do a r/s & an stock sale at the same time, but the r/s ratio and the offering price are not tied together in any way. KBLB & Maxim will choose what those numbers are, nothing else decides it.

You also need to figure the value of the $10-23 million that is received for the dilution and what that adds to the market cap. So yes, your math is using incorrect assumptions.

Thank you, that I did not factor for. So yes, that should help lower the dilution percentage. But the post-r/s market cap with the accretive offering money raised (minus fees) would still be lower than the post-r/s market cap factoring dilution, right?

[WebSlinger]

<< After a 100:1 RS the stock price would immediately be 100 times current price, or $16.25 at the current price of the stock. Why in the world would KBLB set an offering price at $4.25 if the stock price is $16.25? >>

First, after a reverse split, the share price almost ALWAYS tumbles. So KBLB will need to make sure that the price is high enough so that it will account for a probably tumble.

For example, when the reverse split was first announced two years ago, the share price tumbled from 50 cents to about 20 cents. That is a drop of 60%. And that was when the maximum for the reverse split was set at 40:1. Now it is set at 100:1.

I'm not sure a 100:1 reverse split will be required, but it will need to be at least 25:1 to get over the $4 minimum NASDAQ requirement. Once you add in some padding for an expected drop, I could easily see a 50:1 or 60:1 reverse split enacted (based on today's prices).

Second, the offering will be at a discount to the share price. So if the offering is set for $5.25, then the share price will probably be set around $6-$8. Nobody is going to want to buy shares for the going rate (especially large investors that are coming in through a firm such as Maxim), otherwise they would just buy shares on the open market.