Email to Ming Chok
To Ming Chok,
I currently am heavily invested in SOYO. Congratulations on being a shooting star and running a great company.
I noticed that a notorious basher has appeared today on the message boards. His posts are usually followed by huge increases in the sell side volume of the stocks he is bashing. This sell side volume is usually not just confined to stockholders getting out but also includes hedge fund(s) hitting the sell with huge numbers of FTDs or naked shorted shares.
Every stock he has posted on in the last year went, immediately, on the Nasdaq Reg SHO list. Being on the list means that a significant number of fails to deliver are open and remain open in the market.
There must first be some "color of title" in order to naked short shares. The usual way of doing this is for a hedge fund to make a loan to a small company securing it with a note which is convertible to common shares at some discount to the market price. The hedge fund then sells millions of shares into the market using the note to secure the sale. These millions of shares decimate the demand curve and cause the price per share to drop. This price drop results in the ability of the hedge fund to convert more shares than the target company had planned and allows the fund to naked short even more shares into the market.
This process is called Floorless Death Spiral Financing. The lower the share price goes, the more shares the fund naked shorts into the market causing further reduction in demand and share price and allowing more shares to be shorted. The hedge fund's ultimate objective is to make huge profits from their short position while driving the company into bankruptcy. Having the stock delisted and declared worthless is the home run for them because they never have to cover their shorts.
That is a long winded way of explaining the Death Spiral. and for that, sir, I apologize.
My question to you is this: Knowing you have a need for large amounts of money to finance growth, have you recently, or are you now, considering a convertible financing vehicle? If you are, please let me know so I can get out now and protect my meagre assets.
Thank you,
Bruce
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