If I owned a Convertible Debenture which was freely convertible to stock I am not sure that I would agree that if I sold stock prior to converting that I would be naked shorting. That would seem to me to be more like the old "short vrs. the box"
However, let's assume that I own $700,000 of the new debentures. Let's also assume that I think the company has no long term prospects and I going to get all my money back and make a big profit by shorting the stock, driving the price down and covering my short position at a big profit.
OK the quote is .0001 bid / .0002 ask. If you assume the price on which the conversion is based is 80% of .0002 then my $700,000 in debentures is convertible into approximately
4,375,000,000 shares. Long before I can sell four billion shares into the market the pps is going to collapse to the no bid range and I am going to be lucky to get 20% of my investment back.
That might have worked as long as the pps held up and there were not billions of shares outstanding but in my opinion that approach will not longer work.
Here again it is just my opinion but eihter the people who just bought the new round of debentures are not very bright or they see good future prospects.
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