GEO: I suspect there is more than one way to skin a cat. To illustrate, I will give you what I know happened this past year with asfx. At the end of 2008 they had an os of just over 300mm and an as of 500mm. They did a 504 in the form of a few cd's of around $100k and the stock was trading in .002-.005 range for awhile. In Feb they increased the as to 2.5 billion and the selling kicked in. Between buyers staying away and bagholders getting out at a loss, it dropped to .0002. While it was in the .0003 range, some days it was barely trading a few million shares. In june, it launched, and started trading 100's of millions of shares and going up. It worked it's way up to .08, and the volume was still in the 100's of millions. There was even one day when it was over a billion. Then they filed, and the os was 1.8 billion, and increase of 1.5 billion. 250 million of that was used in an acquisition, the rest was debt conversion.
What obviously happened, at least to me, was the cd holder shorted during the day during the downtrend (the t trades that show up a few minutes after close are the buy to cover for those daily short sells). He used a portion of the note to sell it down and recover his initial loan, then at the bottom converted the balance of the note and went long on free shares. They then put together a pump and ran it up, which was easy to do since they held virtually the entire float from the .000x levels. There's no way the entire 1.25 billion shares added to the float occurred on the way down through shorting, because there wasn't that much volume, and they wouldn't have shorted on the way up: that would have been suicidal.
To sum it up, you and brikk could both be correct, and there is room for middle ground, especially since this is all speculation anyway.
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