There was one of those special moments only Rufus can create on subpenny last night. Simon asked him something about the share structure after the big share issuance. Here's the play-by-play...
Simon: Should the outstanding share structure be 721 million or 618 million?
Rufus: Hahahahaa. aaAAAaa. <??> Read that little part in parentheses in that press release. What does it say? The figure will be rounded down to the nearest single whole digit.
Simon: Ok.
Rufus: Yes, it should be 721 because it comes out to 6.53 is what the actual ratio comes out to. We rounded it down. We didn't say anything above 50% would go lower. We rounded it down to keep it all at all at 7 bucks(?) Down to 6 dollars and thats why you got.....I mean 6 shares for each one..that's why you're getting 6.
Simon: Ok
Rufus: Which brings you to 618.
Simon: Ok, so
Rufus: I mean, ya know, c'mon, hehe, there's that greed factor again, my friend. He. Whoever said that
My Comments:
Simon was asking a legitimate question. If there are 103mm shares no and you're issuing 6 new shares per old share (6x103mm), shouldn't the new total be 721mm (103mm+618mm)? But nothing gets past ole Rufus. He thinks the question is about why investors got 6 new shares instead of 6.53. The close price yesterday was 1.80. Put 1.80 in his formula, 15/x - x and you get 6.53). So Rufus proudly points out the part in the parentheses in the press release about rounding saying this allowed them to round down.
This is hilarious because...
1. He didn't answer the question. If he did, he would realize that he has committed the company to issuing 618mm new shares which will result in 721mm shares outstanding, not 618mm.
2. The whole point of the formula is to get shareholders their $15, thus satisfying Rufus' guarantee. But as many have pointed out, his formula was wrong. Putting $1.80 in 15/x-x gives you 6.53 (as he said) but take that a multiply it by 1.80 and you only get $11.76! (FYI, the correct formula is 15/x-1.). By rounding it down, the numbers only get worse. 6x.180 is only $10.80. I'm not quite sure how $10.80 rounds to $15. Guess Simon will have to ask a followup on that one.
3. But wait, it gets better. The blurb in parentheses that Rufus was so proud of is only applicable with a reverse split. With a forward split, there is no need to allow for fractional shares because any whole number of shares multipled by a whole number (6) is also a whole number. So Rufus once again cribbed something he doesn't understand and put it where it doesn't belong.
And that's the truth, folks. All on tape. Your CEO in all his grandeur.
"The things that will destroy America are prosperity at any price, peace at any price, safety first instead of duty first, the love of soft living and the get rich quick theory of life."
--Theodore Roosevelt
