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[QUOTE]Originally posted by wallymac: [QB] [QUOTE]Originally posted by glassman: [qb] it seems to me that the PIPE deal has something to do with the naked shorts. i've searched far and wide, but i've never been able to find out [b] exactly[/b] how they create the naked shorts... even superior stock pickers like the motley fool were unable to decipher how it works for along time, then they started doing shorting themselves, so i suppose they figgered it out. i suppose there must be a couple of ways to do it, but "toxic financing" seems to be one of the no-lose plays in the market... death spiral convertibles is what the old-timers called it... [b]Death-spiral convertibles are privately held preferred stock or bonds that can be exchanged for shares of common stock. An investor will offer a company cash in exchange for a percentage of the company, but with a catch: The investor wants a guarantee that the investment's value won't fall (or won't fall much). If the stock does fall, the investor gets more shares -- and a bigger stake in the company. If Acme's shares rise, the vulture capitalist keeps 30 percent of the business and makes money. [See chart.] But Let's say the stock price is cut in half-which means, of course, that the value of the company is cut in half. By the terms of this death-spiral convert, the vulture's stake cannot fall below $25 million. So instantly, a pile of new shares is handed over to the vulture capitalist, and his stake rises to 50 percent. And if the stock ever recovers, he'll still own half of Acme.com.[/b] http://findarticles.com/p/articles/mi_m0HWW/is_11_4/ai_71886195 [/qb][/QUOTE]AJW is involved with a company that I followed over the past year RKLC. If you look at the filing for the financing this is part of what you see. "On March 3, 2006, we completed financing agreements by executing a securities purchase agreement with the following entities: AJW Partners, LLC,[b] AJW Offshore, Ltd.[/b], AJW Qualified Partners, LLC and New Millenium Capital Partners II, LLC. Under the securities purchase agreement, we will issue up to $2,000,000 in callable secured convertible notes. The notes are convertible into shares of our common stock. The conversion price is based on the average applicable percentage of the average of the lowest three (3) Trading Prices for the Common Stock during the twenty (20) Trading Day period prior to conversion. The “Applicable Percentage” means 50%; provided, however, that the Applicable Percentage shall be increased to (i) 55% in the event that a Registration Statement is filed within thirty days of the closing and (ii) 60% in the event that the Registration Statement becomes effective within one hundred and twenty days from the Closing. The timing of the conversion is at the option of the holder. The notes are secured by a grant of a general security interest in all of our assets both tangible and intangible. The Company simultaneously issued to the private investors seven year warrants to purchase 3,000,000 Series A warrants at an exercise price of $1.00 and 3,000,000 Series B warrants at an exercise price of $1.50" http://www.otcbb.com/asp/Info_Center.asp Now if you look at the chart from that time to now. http://stockcharts.com/h-sc/ui?s=RKLC&p=D&yr=2&mn=0&dy=0&id=p72400251546 It's my belief that they use the Offshore portion to short the stock, driving the PPS down. They know that they will receive more shares the lower the PPS goes so they are borrowing against stock that do not yet possess. So they make the money on the way down and buy/or are issued the stock after the fact. At least that is what I believe they do. Wally [/QB][/QUOTE]
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