What a great post!
As I read through that, I started to have some thoughts about how the MM's vulnerability might be used to burn them out, but I'm not sure if I've really thought it through enough yet. I guess it's more of a fantasy scenario, but it goes something like this:
1. Company has 100 million shares outstanding, and the "cellar box" tactic begins with no bid/offer .0001. Now, pretending that I'm a stuckholder who happens to have substancial financial resources (I don't but some on these boards might), here's what I might do.
2. First, I figure out that as long as the outstanding shares is equal to 100 million, I can theoretically buy this entire company for $10,000. But not if there is dilution. Gotta head that off at the pass.
3. I visit the company and talk to the board/ceo or whoever I need to in private and say "Look, these MM's are KILLING your company, and they're killing me on other positions I own with these tactics. Let's work together. Don't dilute your share base. Let me buy you out instead under an agreement where I will turn control back over to you at a certain specified date, or if certain conditions are met."
4. They say "But we have to dilute!!! We can't pay the bills this month if we don't." And I say, "Bills Schmills!!! I will personally loan the company the money it needs each month to meet its payroll and bills, and I'll do it at BELOW PRIME!"
5. So in my fantasy world, they agree to this. Then I start buying up shares. $10,000 worth. $20,000. $40,000. $70,000. $100,000!!!!!
6. Wait a second, how can I have so many shares? I've got like a BILLION shares here in my account, yet the company only has 100 million outstanding and available for trading. Well I know perfectly well how I got them; the MM's sold them to me through naked short selling.
7. But the company never diluted, because here I am loaning them the cash to pay their bills.
8. Now I pick up my phone, and call my broker. I ask how many shares I have, and I'm told 1 Billion. With a big smile I say "Thank you. I'd like you to send the certificates to me please...."
Now I'm not sure if this makes sense yet because it just kind of occured to me as I read your post.
Thoughts anyone?
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