DILUTION

The Market Maker report is out for December. In the second busiest month - 8.8M shares were traded.

70% Rule
In October we had 13.5M shares traded - a full 10M over the monthly average. Because we now know the dilution that took place during that time was about 7M shares (since we later saw the increase in the public float) - we get this rough ratio: About 70% of the shares over average was dilution and 30% were additional shares traded because of that dilution. In short - dilutive selling caused others to sell.

Monthly method of Determining Dilution
If we extrapolate this 70/30 ratio to December we get this: With about a 3.5M share monthly average and an 8.8M total, we traded 5.3M shares over average. Seventy percent of the 5.3M shares would be about 3.7M shares of dilution.

Daily method of Determining Dilution
If we look at the day to day trading and figure that dilution is only happening on days over four times the normal average - we see that dilution only happened on four days! On December 16&17 and December 30&31! But what a four day group that was! A full 76% of the months trading took place on those four days: 6,680,424 of the 8.8M shares were traded. If we use this method to calculate dilution we see that 150K/day ave x 4day= only 600 thousand shares should have been expected during those four days. Of the 6M extra shares we can expect (as explained above) that 70% were dilution and 30% were caused by the "me too" factor. So using this method we have 4.2M shares of dilution for December.

Average the month and the day method
By combining the month method (3.7M) and the daily method (4.2M) we get a simple, single rough average of 4M shares dilution for the month of December.

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Goodbye Knight

In a somewhat surprising piece of information - KNIGHT the market maker was only in on 54% of the stock traded for the month of December. If we look at the only other real high volume month -October at 13.5M shares- we see Knight with an 81% share.

Now we did have a couple months with Knight trading at 53% (Feb) and 55% (Jun), but those months volumes were at 1.6M and 1.5M shares - not months with (any?) dilution.

So the more we look at this December 54% - the more interesting it becomes. We have already come up with 4M shares of dilution for December. Looking at the December numbers, Knight only traded 4.8M shares! Since common perception is that Knight handles trades for all the big players in this rodeo, Knight handles the dilutive shares. That is why with the large numbers in October, Knight ran with 81%. In the past a good rule of thumb may have been - As dilution rises so does the Knight percentage. Yet the SkunK finds it beyond belief that Knight, the big time leader in this market, would have only traded 800K except for the dilution!!!

So walking down this logical path - the SkunK painted us into an interesting corner:
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Either there was significantly less than 4M shares of dilution for the Month of December

or

Knight did not handle the sale of all the Diluting shares into the market.
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No matter how YOU answer that question - it leads you down interesting paths.

CONCLUSION
For now the SkunK feels that:
1. We were diluted by about 4M shares in December.
2. Another Market Maker maybe - UBS Securities LLC, is being used to service (or share the service) one of the major accounts (YAGI?) (Big?) (?).
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http://www.otcbb.com/asp/tradeact_mv.asp?SearchBy=issue&Issue=GERS&SortBy=volume&Month=12-1-2008&IMAGE1.x=15&IMAGE1.y=3
26 November Blog - Flashback
Unobstructed View
The number of outstanding shares of common stock as of November 19, 2008 was 89,809,764. [Looks like YAGI may have sold about 7M shares into the market by converting debentures. The Average shares/month from July, August and September was 3.5M. October was 13.5M. Looking back at the volumes it seems likely that the sales started on the 6th of October and finished up strong with over 3M shares traded on the 31st. Even with all those shares sold we finished up 20% for the month of October. If we continue on this placid November pace we are set for a slightly lower than average volume of under 2.9M shares trading hands. The SkunK thinks we have had no Yagi or other diluting sales in November. Gers common shares were 82,751,515 as of Aug 19, 2008
http://greenshift-gers.blogspot.com/2008/11/3q-comments-unobstructed-view.html

Related Blog
Knight the Market Maker
http://greenshift-gers.blogspot.com/2008/09/knight-market-maker.html

Good hunting,
SkunK