For those of you who think an RS is merely a zero
Post# of 96879
Posted On: 05/03/2016 12:15:06 PM
For those of you who think an RS is merely a zero sum game I'd ask you to please seriously consider the following:
1. Do you believe NTEK is being naked shorted? If you answered yes continue to the next question. If you answered no, turn off your computer and put your head back in the sand.
2. Is a reverse split in a pink sheet stock followed by additional dilution a good thing? Yes and No. If you're short the stock then the answer is yes but if you're long the security it is not.
3. If you're short NTEK would you applaud a reverse split? Of course you would because sentiment would be negative.
4. If you're short NTEK would you continue to short it following a RS if you knew they planned on diluting it even more? Yup. Maybe even increase your short position to pound the pps and force Longs to capitulate? You betcha!
We know NTEK has plans to dilute following the RS. They've already said so. They say it won't be as much but THAT'S an accounting measure that they won't flesh out for us. You see, lets say today NTEK needs to sell shares for whatever reason. SO in order to attain "X" number of dollars by diluting they need to sell "Y" number of shares. Post RS of say 1:15 they still need "X" number of dollars but they can sell 15 times less shares to get the same "X" number of dollars because each share is worth 15 times more. That sounds great right? In theory, yes! But in NTEK's reality it's not good because they plan to continue to dilute. Here's an example:
NTEK - 2,000,000,000 AS/OS at the time of the RS give or take
Post RS @ 1:15
NTEK - 133,333,333
NTEK lowers the AS from 2 billion to 250,000,000 and some uneducated people will cheer including the shorts. They lowered the AS that's great is what you'll hear. Not so.
Investor A - owns 1,000,000 shares pre RS @ .0045 pps
Investor A - owns 66,666 shares post RS @ .0675 pps
That by itself is no harm no foul to Investor A. His share value is still $4,500.
Now NTEK says we need to dilute to pay off convert debt but only about 80% of it. So we're raising the OS to 200,000,000 and we also need an additional 50,000,000 to service existing contracts. Ok so the balance sheet looks better for NTEK. It does indeed but not for the NTEK Long. His .0675pps was hit by a little more than 50% additional dilution AND it's been pounded by the Shorts who have been cheering the RS from the beginning.
In the end, Investor A's original 1,000,000 shares have been cut to 66,000 and are now worth anywhere from .0045 where we are today to maybe if we're lucky .02.
66,000 x .02 = $1,320
66,000 x .0045 = $297
And there you have it. You've been essentially wiped out! For every million shares you have you can take your honey out for a hot meal and movie with enough for valet parking.
Keep in mind, this is using shares only as NTEK apparently still doesn't have enough money to satisfy the 2 milly in convert debt. Seems odd to me but that's what they will have us believe. If I'm wrong show me. Prove me wrong, I'm all ears. I hope you can because to me, those numbers above are real possibility and it makes me ill.
Apple wasn't our savior, neither was Paramount, Roku, Samsung or Sony. Promises of new studios and more content won't do it either. We've had that carrot dangled but NOTHING has made a sustainable pps gain of any magnitude with our stock. And that is why an RS and further dilution will only make matters worse.
Atlas1
1. Do you believe NTEK is being naked shorted? If you answered yes continue to the next question. If you answered no, turn off your computer and put your head back in the sand.
2. Is a reverse split in a pink sheet stock followed by additional dilution a good thing? Yes and No. If you're short the stock then the answer is yes but if you're long the security it is not.
3. If you're short NTEK would you applaud a reverse split? Of course you would because sentiment would be negative.
4. If you're short NTEK would you continue to short it following a RS if you knew they planned on diluting it even more? Yup. Maybe even increase your short position to pound the pps and force Longs to capitulate? You betcha!
We know NTEK has plans to dilute following the RS. They've already said so. They say it won't be as much but THAT'S an accounting measure that they won't flesh out for us. You see, lets say today NTEK needs to sell shares for whatever reason. SO in order to attain "X" number of dollars by diluting they need to sell "Y" number of shares. Post RS of say 1:15 they still need "X" number of dollars but they can sell 15 times less shares to get the same "X" number of dollars because each share is worth 15 times more. That sounds great right? In theory, yes! But in NTEK's reality it's not good because they plan to continue to dilute. Here's an example:
NTEK - 2,000,000,000 AS/OS at the time of the RS give or take
Post RS @ 1:15
NTEK - 133,333,333
NTEK lowers the AS from 2 billion to 250,000,000 and some uneducated people will cheer including the shorts. They lowered the AS that's great is what you'll hear. Not so.
Investor A - owns 1,000,000 shares pre RS @ .0045 pps
Investor A - owns 66,666 shares post RS @ .0675 pps
That by itself is no harm no foul to Investor A. His share value is still $4,500.
Now NTEK says we need to dilute to pay off convert debt but only about 80% of it. So we're raising the OS to 200,000,000 and we also need an additional 50,000,000 to service existing contracts. Ok so the balance sheet looks better for NTEK. It does indeed but not for the NTEK Long. His .0675pps was hit by a little more than 50% additional dilution AND it's been pounded by the Shorts who have been cheering the RS from the beginning.
In the end, Investor A's original 1,000,000 shares have been cut to 66,000 and are now worth anywhere from .0045 where we are today to maybe if we're lucky .02.
66,000 x .02 = $1,320
66,000 x .0045 = $297
And there you have it. You've been essentially wiped out! For every million shares you have you can take your honey out for a hot meal and movie with enough for valet parking.
Keep in mind, this is using shares only as NTEK apparently still doesn't have enough money to satisfy the 2 milly in convert debt. Seems odd to me but that's what they will have us believe. If I'm wrong show me. Prove me wrong, I'm all ears. I hope you can because to me, those numbers above are real possibility and it makes me ill.
Apple wasn't our savior, neither was Paramount, Roku, Samsung or Sony. Promises of new studios and more content won't do it either. We've had that carrot dangled but NOTHING has made a sustainable pps gain of any magnitude with our stock. And that is why an RS and further dilution will only make matters worse.
Atlas1
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