Tradewell, precisely. And, of course, he SHOULD be awarding himself stock. He's working for the company (we are not) and he deserves compensation. But it should be at a value equivalent to an appropriate salary level.
Here's a fair take:
1. Frank would have 20% (let's be generous) of the company as founder shares. That's 5 billion shares, assuming the other 20 billion shares o/s were all issued to the public or for acquisitions:
.20 * (20 billion + X) = X
X = 5 billion
2. Frank would receive an appropriate annual salary for his work in starting up the company. Assuming an average share price of around .0025 for the past year and a $250K salary, that would come to .1 billion shares this past year.
So, we have 5.1 billion shares, and only .1 billion of it justified as salary for the past year. Where does the other 24 - 5.1 = 18.9 billion come from in the past year?
It comes out of YOUR pocket. It's the share in the company that he has awarded himself in the past year that dilutes your participation in the free cash flows or acquisition price of the channel. Not good.
And here's a question: how does everyone feel about being told the company was 'fully funded until 2008', only to be told (A) the company would be profitable by 2006 (huh??) and (B) later told that the company has been taking on debt to finance operations (what??)
This management of my investment has an enormous credibility problem.
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