Worse than many realize...(Note: The following is my opinion only. The statements presented should not be used for any purpose other than discussion.)
It seems that few grasp the true extent of the dilution that is being proposed here. Here’s my take on it.
First, it helps to remember that the so-called “Investor” is a corporation with shareholders–a legal person and not an actual person. To make it easier to follow, I’ll call the “Investor” “Investor Inc.” , and I’ll call the “Investor’s” shareholders John Smith and Jane Doe.
1. Existing CAB shareholders see their 38,000,000 shares turned into 380,000.
Fareport then proposes to complete a 100:1 share consolidation(from press release)
2. Investor Inc. buys the outstanding debt of about $3,076,083.64 from the current debtholders and converts it into shares at $2.50/sh. That’s 1,230,433 shares. It then causes these shares to be registered to the account of its shareholders, John Smith and Jane Doe , and not to its own corporate account.
It is anticipated that the Investor will instruct Fareport to register the shares issuable upon the conversion of the Prior Loans in the names of certain shareholders of the Investor.(from press release)
Thus, at that point, Investor Inc., the “Investor”, has no shares registered to its own corporate account.
3. The “Investor”, Investor Inc., buys about 452,335 sh. from CAB for about $1,130,838.
The Investor will then purchase approximately $1,130,838 worth of common shares of Fareport issued from treasury at the Conversion Price.(from press release)
At this point, there are about 2,062,768 shares outstanding, only about 22% of which are registered to the account of the Investor.
380,000 (Existing CAB shareholders)
1,230,433 (John Smith and Jane Doe, Investor Inc. shareholders)
452,335 (Investor Inc, the “Investor”)
2,062,768
4. The last step is that Investor Inc. buys pref. shares for $100,000. These will convert to the number of shares required to give it 60% of CAB shares registered to its corporate account (as opposed to those shares registered in the personal accounts of its shareholders, John Smith and Jane Doe).
the Investor will, after those preferred shares are converted into common shares, own for its own account 60% of the issued and outstanding common shares of Fareport(from press release)
Given the above figures, this would require that the pref. shares be convertible into 1,963,314 common shares, enough when combined with its 452,335 shares to give it (Investor Inc.) 60%.
The net result. Investor Inc. and its shareholders (Smith and Doe) will have a combined total of about 3,646,082 of the 4,026,082 outstanding shares, or 90.6% of the shares.
Existing shareholders, who presently own 100% of the shares, will see their stake diluted to less than 10%.
My conclusion? We are getting shafted.