Medbox Inc (OTCMKTS:MDBX) Accelerates Downhill

The chart stumble Medbox Inc (OTCMKTS:MDBX) went through on Thursday turned into all-out downhill blitz. MDBX slid another 20% on Friday, dropping to just over six cents per share, on its heaviest daily volume for the past month.

The company last made a sizable move up on Oct 22, when MDBX announced the collective settlement of all ten class action and derivative lawsuits that were initiated, with MDBX and various present and former company directors and officers as named defendants under them. The initial excitement resulting from the announcement fizzled out pretty quickly.

Traders possibly realized that there was a number of serious charges that the claimants levied against the company and its management, including unjust enrichment and abuse of control. It would make sense that the people who initiated the lawsuits did not agree to drop all charges against a bag of Milky Ways. MDBX stated that the collective settlement did not have a materially adverse effect on the company’s financial position or operations.

This leaves one very likely scenario about how the settlements were negotiated and that involves the issuance of rather a lot of MDBX stock. One thing to keep in mind is that in early October the company increased its authorized shares cap almost four-fold, going from 110 million to 410 million maximum issuable common shares.

While there is no evidence that this new AS space was flooded by newly issued shares to settle the lawsuits, the lack of any specific information on what the collective settlement entailed and the fresh AS increase can give rise to suspicions.

There’s also the recent S-1 filing for the registration of almost 195 million shares issuable upon the conversion of debentures with attached interest to keep in mind when considering the stock.