Mar. 24 at 4:33 AM
$BRLL
In the OTC (Over-the-Counter) market, shell companies often use reverse stock splits as a tool for extreme share dilution, frequently resulting in significant losses for retail investors. This process, sometimes part of "toxic financing" or "death spiral" schemes, allows companies to reset their share price to a higher level, only to immediately issue massive amounts of new shares, effectively wiping out existing equity.
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Mechanics of the Dilution Scheme
The Reverse Split: The company consolidates shares (e.g., 1-for-100), which increases the per-share price without changing the company's actual value.
Authorized Share Retention: Crucially, if the company does not reduce its authorized shares in proportion to the split, it retains the ability to issue a vast number of new shares at the now-inflated price.
Continuous Issuance: Following the split, the company issues new shares to insiders, creditors, or through convertible debt, which "dilutes" the value of the shares
