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Right, I guess what I'm really questioning is who let him take on that much liability without having him personally guarantee it. I can't get a small business l
by ericwaller 17y ago
Right, I guess what I'm really questioning is who let him take on that much liability without having him personally guarantee it. I can't get a small business loan for my brand new corporation, pay it all to myself as compensation, and walk away saying "oh well, the business failed."
- whatusername 17y agoThe shares had an outstanding capital raising thingy going (don't know the terms) Each individual share held the requirement to pay $2 at some later point.. So what he did was purchase a bunch of shares worth about -$1.99 for 1 cent each. It's on the market - so noone had to approve he could actually pay the later $2 installment. He then managed to separate the value (voting rights) from the liability (oustanding $2/share) and profited from the value.
- ericwaller 17y agoOk, so basically the system wasn't really set up to deal with this strange asset. Because if I sell a put option (which means I may be required to buy shares later on), my brokerage is definitely going to enforce margin requirements to make sure I can afford those shares if things don't go my way.