RE: just love20 Sep 2018 07:55
They phoned the Broker/Brokers they usually sell through and told them to forward sell another batch of shares IMHO. The Broker/Brokers didn't want to lose their business, so they take the trade on trust. YA then have a certain amount of time to produce a certificate. Therefore, before the July agreement allowing FRR to pay in cash; shares or pay off the whole of the loan, YA obtained the shares from FRR after already selling them. The reduced price from the constant selling meant that they received even more shares from FRR, as the amount to cover the payment increases with the shares worth less. YA also profited from getting the shares at a discount :-
Variable Conversion Price" means 90% of the lowest daily volume weighted average price of the ordinary shares of the Company (as reported by Bloomberg) over the five consecutive trading days expiring on the trading day immediately prior to the date of delivery of the relevant conversion notice.
Therefore, by illegally naked shorting ( selling shares they do not already possess), they a) gain more shares; b) sell at a price far greater than the 10% discount; and c) lower the market cap. of FRR, so that any future loans would require an even greater number of shares. Hence, why these are referred to as death spiral loans. However, many junior miners and oil + gas companies often have little alternative when already in debt. If they didn't naked short they could be viewed as a necessary evil, that allows some companies to continue trading. Hopefully, YA and the rest of the brat pack shorters, TW et al will get their just deserts from Uncle Sam.
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