Let's say X has an authorized share lot of 100 shares worth $1 a share and of that lot 50 shares are outstanding. X does a deal borrowing $20 paying in convertible debt. The payment is in stock, warrants, etc. Now the outstanding count increases to 70 shares and 30 shares are left. X has to make monthly payments to the financier and does it with more shares. After a while, the authorized shares are gone. The only thing X can do is increase the authorized count and further dilute shareholer equity or reverse split and begin giving away the newly found shares even further diluting shareholders stake. Throw in some warrants and contract language insuring put options for lengthy durations and X is screwed as are the shareholders. Consider Shearson having two such deals going on...... And shares being given away are done so in discount to market prices.
These financiers can short the stock then turn around and sell it, or vice versa...... holding down share prices for years.
Behind it all, you need question the motives of the deal in the first place. Shearson borrowed a few million dollars for the share price destruction you see going on. They knew this would happen yet did it anyway. Are a few million dollars in loan the sign of a healthy or well managed company? Are other loan vehicles more practical? Is the silence coming from Shearson comforting? Is this a time to post a public financial report late? Do you approve of the company and transfer agent hiding public information? The ceo is said to be talking to shareholders by phone and email. C'mon! ceo's don't do stuff like that. Something is seriously amiss with Shearson.
Good luck
rocket man - elton john
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