There are no rules for previously issued shares that are already in the float. They are already accounted for. Ask yourself, what is happening to those shares from people he converted to preferred??? The company didn't pull them from the float or restrict them. Actually, around the same the time the large portion converted, large lumps got sold into the bid dragging the price down.
Also, I don't really consider buying at the ask on heavy downticks much of a buy.
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