The problem with Lynn issuing...
...50 - 70 million shares is he needs to find buyers willing to put up that kind of money. This stock trades, what, $150k worth of stock in a day? The buyers aren't there. And if he wanted to find them, he'd have to offer some value to them in the form of a discount. A huge discount. Think about it, the market is saying that right now the company is worth about $30mm. Who would pay $50mm (assuming a $1 share price) to buy a company worth $30mm. They wouldn't, but if the price were $0.50, and the company was adding $25mm to it's balance sheet, then perhaps they would (that's just an example, I have no idea what discount he'd have to offer, but it would be enormous, especially if he wanted to do it in two days). At those figures, the new shareholders would own well over half the company while existing shareholders just got diluted to near oblivion.
If he did find buyers to do that, I doubt they'd let him remain chairman and probably not even CEO (given his utterly poor performance to date).
As for shorts making a shady deal to exit in front of russell rebalancing, that isn't really what happens. They work it out with brokerages to minimize the impact of the rebalancing on the price. Some will use derivitives to simulate the rebalancing in their portfolios and unwind them later while others will have already done so prior to the date. Still others will allow for some tracking error (returns that don't equal index returns) for a little bit in hopes of stocks returning to their values after a bit of time and then rebalance their portfolios. Longs do the same thing when stocks get added to the index and when index weightings change.
As always, all of the above are just one man's opinions, mine.