We may be held liable for online content provided by third parties.7 Our services are susceptible to disruptive problems.7 We depend on our computer infrastructure and will be adversely affected by any failure or damage to our systems.7 We depend on the continued development and reliability of the Internet infrastructure.6 We are dependent upon continued growth in the use of the Internet.6 We require substantial funds and may need to raise additional capital in the future.6 We have a short operating history upon which to judge our prospects.6 We have incurred net losses since our inception and anticipate continuing losses.6 Note that demand is spelled "damand" and the TOC also cites a Y2K risk, lol: They never seemed that great financially, as evidenced by their 2000 Prospectus, a document which, amongst other things, detailed their IPO.
Log On America (LOAX) was a Delaware incorporated Rhode Island based telecommunications company that provided internet services during the dotcom era. Log On America's CEO specifically states that Citadel both bought $3.75 million in convertibles and engaged in "massive" short-selling, manipulating the price from $17 to less than $1 per share. The Institutional Investor article that started this DD also mentions a company named Log On America and how they sued Credit Suisse and two Citadel-owned funds, charging that the companies engaged with short sellers after purchasing death spiral securities from them. Is this what Citadel does? The Institutional Investor article linked above doesn't say so, but it does say that Citadel "has become increasingly aggressive in private placements", many of which "had a reset provision allowing the company to convert at a lower price if the stock fell." It also says that no one really knows what Citadel does, and that's what Citadel wants. Step 4: Once the stock price is low enough, convert your death spiral security into a shit ton of shares and clothe your naked shorts/turn your rehypothecated shares into regular ones. Naked shorting and rehypothecation work great! Step 3: Short the shit out of the company. It definitely helps if you can plant people on the company's board to recommend they do this, or get a shady consulting company to recommend it for you. You'll have to call it something else and also probably lie to or otherwise manipulate the company to convince them to buy it. Step 2: Buy a death spiral convertible security from said company. Step 1: Identify a company that is desperate for cash (no one who isn't desperate would be interested in a security this shitty). I think you know where this is going, but in case you don't: Part 2 - The Death Spiral Playbook And if those shares don't exist, then XYZ company must make them. But maybe I wait until the stock goes lower, to say $0.01/share. But on a death spiral convertible bond, I still get my $1,000,000 paid in 50% off shares, meaning I now get 2,000,000 shares. So if XYZ company drops to $1/share, on a regular convertible bond I'm down 80% (200,000*$1 - $1,000,000) minus interest. All good so far.īut here's the thing: convertible bonds go the other way as well. In this case, I might give XYZ company $1,000,000 today in return for $1,000,000 in 50% off shares in the future. And there's reason to believe the stock will rise because I just infused the company with cash.Ī death spiral convertible security is similar to a normal convertible security, with one key difference: instead of getting X number of shares, I get X dollars paid in shares. For example (I'm totally making up these numbers, I don't know if they are realistic but I do know the math is accurate), stock XYZ is trading at $3/share, and so I buy a bond for $1,000,000 allowing me to own 200,000 shares in the future. Basically, a convertible security is money given to a company (often in the form of a bond) in return for X number of shares of the company in the future. Part 1 - Convertible Securitiesīefore we get into death spiral convertible securities, we need to know what a regular convertible security is. I never heard of these before, but I looked into them and they fit so perfectly into all the corruption we've been discovering, my mind was blown. In addition to this relationship, the article mentions something else I found interesting, yet another piece of the naked short/cellar box puzzle: death spiral convertible securities. Props to u/JustBeingPunny for discovering this Institutional Investor article discussing the relationship between BCG and Citadel.
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