Strange fall from grace, page-2

Want a conspiracy theory? How about this one?

A theoretical company realises that it's going to run out of cash and do another capital raising to fill the coffers. It knows shareholders won't like it because of previous promises made by the CEO that the company will not need to tap shareholders for money again because it will be profitable soon.

To demonstrate their support and alleviate shareholder anger, management decide to participate in the capital raising.

However, a theoretical director on the board of this theoretical company already has a very large shareholding in this theoretical company. His position on the board gives him a good insight into the company's performance but it also prevents him from trading his existing shares.

Now, his insight into the short term future of the company lets him see that the company will miss its current quarterly revenue targets. He knows that this will hurt his shares so he resigns to be able to sell his shares before their imminent share price fall.

However, this undermines the capital raising process which hasn't concluded yet. So the theoretical director announces that despite his resignation he will participate in his component of the capital raising and "continue to support this theoretical company through his substantial holding".

He does buy a few new shares in the capital raising, but shareholders eventually discover (through an unusually delayed top 20 shareholder disclosure on the theoretical company website) that the director is dumping his much larger holding of shares on the market, saving himself hundreds of thousands of dollars whilst the share price reacts to a poor quarterly result that was nowhere near the targets set by management.

Pretty conspiratorial, huh?