Replies to post #3433 on Viaspace, Inc. (VSPC)

[tommy 9 fingers]

First let’s start with the definition of the word dilution.

Dilution
The change in earnings per share or book value per share that would result if all warrants and stock options were exercised and all convertible securities were converted. Diluted earnings per share are calculated in this way and give a more accurate measure of a company real earning power.

So with that said even with new shares coming into the market which I don’t dispute that they are, the value of VSPC still continues to rise. Which it is and although it has been small upward ticks the trend supports this upward valuation of your shares. Two weeks ago I bought 25,000 shares for .023 and today they are worth .0284. I have bought a total 141,500 shares at different levels and at least 70% of those shares are worth more that when I bought them today at least and I am in the green.

So based on that and even with the new shares on the market the value of my shares has not been diluted as they are worth more than when I bought them.

But if you bought all you shares at .03 or .04 then you could say the value of PPS has been diluted by these new shares. So I think it is a matter of perspective.

There is no doubt that new shares from the reserve are coming onto the market as I pointed this out to you in my last post to you.

But I think you have to take into account that they have not raised the A/S to do this. By Definition all shares are included in the definition of dilution including those shares all the way up to the A/S or to include the reserved shares. If they were to raise the A/S and introduce those new share to the market then I would consider that to be dilution that you would need to worry about. But they are not doing that and as I pointed out in my post they have enough reserve that IMO will not need to.

If Dilution as you describe it, is used as capitol to increase the overall value of your PPS then by definition it is not dilution because they have increased the earnings power of each shares by growing the company. They can’t grow the company without putting these new or reserved shares on the market. By definition reserved share are not new as they are part of the A/S and I shouldn’t use that word. I only use it in the sense that when reserved shares are put on the market they are new to the market and active trading. If VSPC is then using your capitol to increase the value of your investment then they are increasing the earning power of your shares.

Do not forget that as time goes on and VSPC succeeds that this is the type of management that will buy back these shares at some point to increase the value of your PPS and they are the type that once they have real money in the bank that is sufficient enough to supply their capital needs the will likely retire shares that they buy back.

Also I think you have to take in to the equation that this stock is undervalued at this time and I think is because the A/S has already been factored into the price by people who assumed one year ago that the remaining reserve from the A/S was going to be diluted just to keep the company going and not create or be used for growth. This has now changed in the last 6 months and it is just now starting to be made known to the investing community by this promotion campaign.

Now we are seeing this dilution being used in a way that will actually create value for the company and shareholders and will once the MM's are done consolidating increase the value of our PPS even more. And then once contracts are signed and revenue coming in dilution won’t even be a worry.

Again if it does this then by definition these new shares will not be considered dilutions.

This is just my opinion and you don't have to agree, but please do give it some thought.

If you disagree, please explain why more clearly as I would love to know as I could be wrong.

I think if the PPS in back down to .023 next week then I will be wrong. If the PPS is at .032 and getting higher then I might consider me right.

Regardless, this is a necessary evil at this point in time for VSPC, but IMO opinion it is being done to increase the value of your investment not dilute it.

Thoughts anyone.

[tommy 9 fingers]

Tanne,

I think my side of the debate using the definition of dilution is better made using simple math.

Let say that you start a company by going public and to keep it simple let’s start the company by issuing an A/S of 100 shares of which 50 of them are kept in reserve and not traded on the open market. Let’s say those shares are valued at $1.00 each on the open market.

By definition of dilution if all shares are sold at once no matter what kind they are then this is your diluted value. This mean if I sold this company having an A/S of 100 shares and a O/S of 50 shares they are still $1.00 each. So they have not been diluted.

Now let’s say that I am about to grow my company and use some of the 50 shares in reserve by selling them on the open market to raise capital. To make it easy let’s just say I put all 50 on the market at once. When I do this and if this causes the PPS of my stock to go down to $0.90 once all 50 shares are sold, then yes you could say this is dilution. But I think it is just the value the laws of supply and demand cause. Company values change minute by minute, day by day at the whims of share holders.

But let’s just say that investors hear that when I am putting these 50 reserved shares on to the market to raise capital to buy out IPA and GKG and they like this decision and think it will be good for the company. Then once those 50 are sold onto the market and the PPS goes to $1.10 p/s then this is not dilution. Because the value of all shares have gone up. Again values of companies are decided at the whims of shareholders.

Now let’s say that IPA and GKG doesn’t turn enough profit to cover expenses right away and I need more capital to keep going. I will then need to raise the A/S by 50 shares, and when I put all 50 share onto the market in knocks the value of the 100 share down from $1.10 ps to half right away at $0.55. It does this because the market value of the company is still the same the day before when it was just 100 shares and now it is 150 shares. By putting the new shares above the A/S onto the market I did nothing to increase the value of the company, I diluted it. This is what I consider real dilution that should concern us all.

But this in not happening with VSPC, our total A/S is already figure into the share price. So if we put some of those reserved shares onto the market it does not hurt the PPS unless the shareholders disagree with why you are putting them on the market. What we are seeing right now is just how natural supply and demand effects share price and even with reserved (or new) shares or a new supply of shares entering the market and has I pointed out there has been 5.6 million put into the market by VSPC that I know off, there is still enough demand to cause an upward trend. So management IMO is being diligent in how many new shares they making available for trading, because they are not killing the PPS by dumping all at once.

Lastly, let’s say I decided to sell this fake company we are using as an example and it has an A/S of 100 shares a total with 50 of those share held in reserve by the owners and 50 shares on the market in the hands of shareholders and it sells for $1.00 a share. That means when the company is sold it is worth at total of $100 or $1.00 per share regardless of the 50 shares in reserve and the 50 on the market. It’s not like the 50 the shareholder shares are worth $2.00 a share and the owners 50 shares are worth nothing they are all worth $1.00 each.

So this applies exactly to VSPC as well because they are not raising the A/S to put newly minted shares on the market that actually cause real dilution.

No this is not to say that we would rather have those reserved shares stay in the strong hands of the ownership instead of the weak hand of the MM’s or shareholders. Or that reserved share entering the market for the first time can’t cause PPS swings because to the principle of supply and demand, because there is more supply now that we might take a hit.

But most the shares VSPC will be taking out of the reserve is being used to make Chang an owner with a majority stake and if he believes in this company those shares will likely not even see the open market. He will want to keep those for his family and will profit from those once VSPC gets to a point of issuing dividends. Not to say he won’t sell some to have a little play money. But I am sure he will keep a majority of what he is given. And even if he doesn’t and he starts selling after the 90 day lock we will be able to see this on the insider filings and we will know what his opinion of the company is then. And because of the 90 day lock and once the lock it over Dr. put limits on how many shares he can put into the market at any one time. This means that Dr. K has ensured that VSPC will have time (at least 3 months if not more) to prove the value of IPA, GKG, DMFCC, Ionfinity, and VGE to shareholders and future investors that we plan to sell our shares to at higher prices.

I hope all this helps you feel better about your investment and if it does please let me know because it was a lot of work to type this up. If it doesn’t please do me the courtesy of explaining your side of the debate in as much detail. Thanks.