Some people have fun on this board, and I couldn't join the party because I was a bit upset over my loss on JRT. Even if it is a relatively small loss for me ($8,000 which is a small percentage of my stock portfolio), the manner of this loss was unpleasant.
I started to buy in at a correct moment, as I mistakenly thought, when the stock price dropped to $0.28 after the reverse split. I carefully looked at their filings and didn't see a big risk. Everything looked relatively fine. I knew that there would be some loss in Q4 and I still believed that the price was OK, with all bad news overfactored in the price.
So, I wasn't really surprised with the Q4 loss, even if it was a bit bigger than I thought.
However, the bold fraudulent action to wipe out existing shareholders with $150M in common stock offering to be raised, just caught me off guard.
I could not even think about possibility to dilute the company from 5M shares to infinite number of shares. For example, at today's closing price, they need to sell 170M shares to raise $150M. It is more than 3000% dilution.
The crooked management and board basically steal money from existing shareholders. It is fraud.
I understand that it will not be so easy to get them legally, and my loss is quite small for any legal action. However, I think that somebody, with bigger position in JRT, will get them.
It is worth mentioning that with such management and Board actions, it is very possible that JRT was involved in some kind of fraudulent financial reporting. So, it very well might be one fraud covering other fraud.
Why diluting shares like this might constitute a fraud you might ask? They, of course, have Board voted on this. So, it at least looks legitimate. Well, there are laws around that regulate such significant for a corporation events. Most likely one or more such laws are broken even if they think that they are all covered. Smart lawyers, competent in corporate governance will likely identify many weak spots in paperwork and voting surrounding this massive dilution.
It is not so legally simple in U.S. to wipe out existing corporate owners, unless there is a BK procedure in place.
Again, my loss is too small for me to get them legally prosecuted. However, I believe that JRT committed some kind of financial fraud and should be prosecuted. If and when some bigger shareholder starts this legal process, I might jump in just to pay those JRT crooks back.
This fraud is not so small. Under Security Act of 1934 and especially under SOX, it is quite possible for people who sign intentionally false F/S to go to jail.
Here we don't know how far reaching the fraud is, but it might be uncovered eventually once somebody sues the management, Board, and the auditor.
Basically, the JRT management, with the help of Board, took over the company from existing shareholders. Nice move, but there might be a bunch of legal problems with such move. Who voted? How voted? On base of what? Where the shareholders' laws broken? Many questions can arise.
Can you imagine for example a Board of any publicly-visible US corporation just get together and wipes existing shareholders without going BK? Not likely. Let try BAC or C, for example, wipe out the government as a shareholder and you will see what happens.
Here JRT management thinks that nobody will notice or notice but not care or care but not have enough resources to get back on them. They might be right. Or might be very wrong. We will see how it goes.