Replies to post #31905 on RespireRx Pharmaceuticals Inc (fka RSPI)

[bladerunner1717]

(From Wallstarb on Dew's I hub board):

"That my firend is called a death spiral convert - aka bottomless or floorless convert. Essentially the lower COR goes the better for that investor. Many tiome when we would do these deals we would just short the common stock to $0 - then force conversion and cover with the 10's of millions of shares that the convert is entitled to. There's no reason to ever own COR if they are issuing death spiral converts."


Bladerunner

[enemem]

The terms do look good, but more importantly, my sense is that R&R isn't involved.
Bringing another entity with deep pockets may strengthen cor's position, since it effectively reduces the percentage of shares held by any one stakeholder. If any entity was seeking to gain control of the IP via stock accumulation, this deal is perhaps a setback.

[zebra4o1]

Neuro, Should we rush out and buy shares of the other desperate biotechs in the Samyang portfolio? Presumably Samyang has done some due diligence and are only investing in companies that have at least something going for them.

[gfp927z]

Neuro, Yes, it certainly looks better than the alternatives.

However there is an incentive for Samyang to keep the pps down as close to .10 as possible until they can convert (the soonest conversion being mid April). After conversion though, Samyang's incentive is to get the pps up as much as possible.

One difference between this convertible debt deal and the previous BAM convertible preferred stock deals of 2009 is that there probably isn't a 5% ownership limit on this deal as there was with BAM (we'll know for sure when the SEC filing is available).

Because they couldn't own more than 5% of Cortex's outstanding stock at any given time, BAM had to convert only a portion of their preferred shares at a time, sell them off, convert some more, sell them off, etc, thus staying under the 5% restriction. This meant that BAM couldn't become a large owner of Cortex and threaten to takeover the company.

With Samyang however, I don't think there is the 5% restriction (the SEC filing will tell us). Conversion of the convertible debt into equity probably can't be done piecemeal/incrementally as with BAMs convertible preferred stock. Sanyang will convert the whole thing at once and become an instant large (12-17%) owner of Cortex (17% with the warrants).

That isn't necessarily entirely bad though, since it will keep Varney on his toes. Even if Samyang is happy with their 17% minority position in Cortex, there's always the risk that Samyang will sell their 17% stake to another entity who does want to force a change of control.

[tregaron]

Let's say share price floats back to .10 by close today (and it's headed in that direction). That means Samyang can convert 15 million shares, assuming they can hold share price under .12 or so. Add 40 percent for the warrants and they control 21 million...plus any additional shares thay may already own or will buy between now and April.

In effect, Samyang has control of the company now in either scenario (conversion or default)...and it will have cost them a maximum of $2.3 million.

The only question in my mind is where does that leave current shareholders?