Wizard
Administrator
Wizard
Joined: Oct 14, 2009
  • Threads: 1325
  • Posts: 21766
November 20th, 2015 at 2:05:45 PM permalink
Quote: wellwellwell

As of 11/3 NTEK had 1.566 billion outstanding.



As simply a general question, what are the reasons a company would issue this many shares?
It's not whether you win or lose; it's whether or not you had a good bet.
GWAE
GWAE
Joined: Sep 20, 2013
  • Threads: 93
  • Posts: 9854
November 20th, 2015 at 2:09:59 PM permalink
Quote: Wizard

As simply a general question, what are the reasons a company would issue this many shares?



In the Facebook movie they did something similar. It diluted the ownership of the previous majority share holders to make a new majority. I believe that is what happened anyways
Expect the worst and you will never be disappointed. I AM NOT PART OF GWAE RADIO SHOW
wellwellwell
wellwellwell
Joined: Jun 17, 2015
  • Threads: 0
  • Posts: 154
November 20th, 2015 at 2:15:22 PM permalink
Quote: Wizard

As simply a general question, what are the reasons a company would issue this many shares?



You must realize these companies aren't audited, regulated by the SEC kind of companies. They can't issue shares like SEC companies.

Over on the NTEK/NTGL thread started by Mr. V, I explained the process and how many shares NTEK has issued in the past 10 months.

To answer your question directly there doesn't appear to be a valid answer, and it appears the company itself is seeing very little of the proceeds from the share issuances.
DRich
DRich
Joined: Jul 6, 2012
  • Threads: 71
  • Posts: 6097
November 20th, 2015 at 2:21:15 PM permalink
Quote: Wizard

As simply a general question, what are the reasons a company would issue this many shares?



For a small penny stock company they will sell shares to raise cash or pay debts. Generally these companies have very little operating capital and when the bank account gets close to zero they will issue and sell X new shares at a price slightly below market value to give themselves more operating cash. Obviously each time they do this it dilutes current stockholders and there really isn't any recourse. If they don't sell more stock the company goes out of business and the shareholders get nothing.

A lot of people say that penny stock companies sell more stock than they do goods and services. With penny stocks it is easy to sell people dreams.
Living longer does not always infer +EV
wellwellwell
wellwellwell
Joined: Jun 17, 2015
  • Threads: 0
  • Posts: 154
November 20th, 2015 at 2:27:23 PM permalink
Quote: DRich

For a small penny stock company they will sell shares to raise cash or pay debts. Generally these companies have very little operating capital and when the bank account gets close to zero they will issue and sell X new shares at a price slightly below market value to give themselves more operating cash. Obviously each time they do this it dilutes current stockholders and there really isn't any recourse. If they don't sell more stock the company goes out of business and the shareholders get nothing.

A lot of people say that penny stock companies sell more stock than they do goods and services. With penny stocks it is easy to sell people dreams.



Not true DRich. To sell stock as you described the company has to file a registration statement outlining all the details of the stock being sold. NTEK is not a SEC reporting company and is unaudited so they could never file a registration statement.

NTEK kind of companies can only issue shares for debt aged one year or older. They can borrow from toxic convertible financiers but those shares are issued at a huge discount to the market price. Google Rule 144.
DRich
DRich
Joined: Jul 6, 2012
  • Threads: 71
  • Posts: 6097
November 20th, 2015 at 2:41:53 PM permalink
Quote: wellwellwell

Not true DRich. To sell stock as you described the company has to file a registration statement outlining all the details of the stock being sold. NTEK is not a SEC reporting company and is unaudited so they could never file a registration statement.

NTEK kind of companies can only issue shares for debt aged one year or older. They can borrow from toxic convertible financiers but those shares are issued at a huge discount to the market price. Google Rule 144.



First of all, I want to make it clear that I didn't say that NTEK did any of this.

Technically, you are probably correct. The company I used to work for would find an investor to "loan" money that was collateralized by shares of stock. In our case the loans were never repaid and the investor would end up with the stock. I couldn't even try to explain the underlying details of the transactions.
Living longer does not always infer +EV
Wizard
Administrator
Wizard
Joined: Oct 14, 2009
  • Threads: 1325
  • Posts: 21766
November 20th, 2015 at 3:27:40 PM permalink
This is a split-off of GOOD GRIEF, I'M NEARLY RUINED!.

First let me say that I'm embarrassed to have to ask these questions. I studied economics in college but never learned anything practical from it.

So, let me say that I find it totally unethical to current stock holders to issue new stock out of thin air. The old stockholders should either agree to it or be fairly compensated for their smaller share of the company.

Yes, I saw "The Social Network." As I recall, the guy who got diluted did sign something agreeing to it, although he was trusting the advice of a dishonest attorney.

Is my understanding correct? If so, why would anybody buy a share in anything knowing that share could get diluted at the will of the company? Does this happen often? I've played the stock market and don't recall my share values ever dropping precariously overnight due to a dilution.
It's not whether you win or lose; it's whether or not you had a good bet.
DRich
DRich
Joined: Jul 6, 2012
  • Threads: 71
  • Posts: 6097
November 20th, 2015 at 3:36:14 PM permalink
Quote: Wizard

Is my understanding correct? If so, why would anybody buy a share in anything knowing that share could get diluted at the will of the company? Does this happen often? I've played the stock market and don't recall my share values ever dropping precariously overnight due to a dilution.



When something like this happens the argument is that the shareholder is not necessarily diluted. They own a smaller percentage of the company but the company has gained an asset so therefore the company is more valuable.

This happens often when companies buy each other. Company 1 will offer X number of shares to the shareholders of Company 2 in lieu of cash. Although the shareholders of Company 1 now own a smaller piece of Company 1, Company 1 is now more valuable because it has all the assets of Company 2.

The theory is that the stock price will fluctuate to match the value of the company.
Living longer does not always infer +EV
EvenBob
EvenBob
Joined: Jul 18, 2010
  • Threads: 423
  • Posts: 24135
November 20th, 2015 at 3:46:12 PM permalink
Diluting with 10's of millions of shares
is often part of a scheme called 'pump
and dump'.

https://en.wikipedia.org/wiki/Microcap_stock_fraud#Pump_and_dump
"It's not enough to succeed, your friends must fail." Gore Vidal
Wizard
Administrator
Wizard
Joined: Oct 14, 2009
  • Threads: 1325
  • Posts: 21766
November 20th, 2015 at 4:30:58 PM permalink
Quote: DRich

When something like this happens the argument is that the shareholder is not necessarily diluted. They own a smaller percentage of the company but the company has gained an asset so therefore the company is more valuable.



Good point. Are there laws to enforce that dilutions are doing for just cause?

Quote: EvenBob

Diluting with 10's of millions of shares
is often part of a scheme called 'pump
and dump'.



I'm not saying you're wrong but I thought most pump and dumps were buying into a questionable stock and combining it with a lot of hype about how it is growing, and then those on the inside dumping their shares at a huge profit.
It's not whether you win or lose; it's whether or not you had a good bet.

  • Jump to: