Here is the post I mentioned..after what has transpired it makes interesting prophetic reading hey?
The HLCS phoenix will rise, but will we be diluted out first?
I have been a loyal long, but I am worried about what is going on. I have seen secondary offerings used at other companies in a way that I suspect was an orchestrated transfer of ownership from existing shareholders. My hope is that is not what is going on here. The last thing we need is the U.S. govt to start messing with a good company with a promising technology that can benefit us all.
Here is the maneuver that I hope does not apply here:
Shorts gang up on a company’s shares and drive it down. Company is in danger of failing and therefore no one is willing to risk purchasing the company’s product. Shorts arrange a private placement so that they don’t have to cover in the open market and drive back up the shares. In the press they have saved the day, but in reality they created a large artificial supply of shares at the time they began shorting, and so when they bought the shares back from the company for a song they had made money on the way down and then assumed a significant ownership position which massively diluted existing shareholders.
Also, any time a company announces that they are offering $xx million worth of shares and then the share price starts diving, get ready for huge dilution. The shorts will tear into a company and then buy the shares when they have driven it to the toilet. For example, $50 million at $2 a share gives them 25 million shares. $50 million of $1 shares gives them 50 million shares. The latter is clearly a significantly worse dilution to existing shareholders.
Often a company of technologists never has an idea of what hit them. It just seems like bad luck. I have seen the same pattern at many other companies though.
There are ways to thwart the shorts intent on doing this. But management has to be savvy about the situation.
Anyway, I certainly hope that is not the game afoot with Helicos. If it is, then management would be wise to work to protect all shareholders’ interests (and not just a select group of the largest shareholders).