Asia Cork ( AKRK) is broadening share ownership among the company's top executives and board members, which could help to facilitate a possible public offering.

I had written earlier this week that the Chinese cork flooring maker may have remedied an outstanding liquidity issue concerning a past due payment of $700,000 and accrued interest owed to Ancora Greater China Fund as part of a funding arrangement in June 2008.

Part of my hypothesis was due to the close number of shares that the CEO and chairman pledged to secure the arrangement (7,630,814) vs. the amount of stock they disposed of, outlined in recent S-4 filings (7,930,000).

I also took a look at some recent S-3 documents that show that three board members were allotted an aggregate of 2.8 million shares.

The company has informed me that the 7.9 million shares were not transferred to Ancora, but rather to a number of high level executives in the company. This action broadens share ownership among the company's top executives and board members and will help to facilitate a possible public offering by meeting the stock market exchange listing requirements, and will also better link the interest of management personnel to the company.

So what does all this mean?

It seems that Asia Cork may be planning a public offering, a notion in line with some information disclosed in its 2009 September quarterly filing stating that it had "signed an exclusive financial adviser agreement with Global Arena Capital Corp. to act as the Lead or Managing or Co-Underwriter or Investment Banker in connection with a proposed public offering." The initial agreement expires on May 31, 2010, providing investors with a time window to speculate when an offering could occur.

I also had suggested that investors may be intrigued that an 8-K filed on Dec. 24, revealed some board changes at the company. Specifically, the filing outlined the appointment of a new COO, CTO and three independent board members, as well as the establishment of charters related to the audit and governance committees.

Those actions can often coincide with an up-isting move and/or financing transaction. Being that AKRK is below $3 per share, it would need to effect a reverse split to minimally qualify for the American Stock Exchange, a very common move these days by U.S.-listed Chinese companies.

While the outstanding Ancora debt still exists, the due date for the promissory note has been extended for another year, which means that Asia Cork is no longer past due on this obligation. An offering, depending on Ancora's involvement, could ultimately address this issue and provide necessary capital for expansion goals.

On the whole, these developments are positive because

(1) They align management's incentives with the best interests of public shareholders.

(2) They offer conjecture that Asia Cork may be preparing for an uplisting.

(3) A short-term liquidity problem is taken off the table.

Of course, the topic of dilution is now back on the table, which will depend on the use of the funds.
Maj Soueidan founded The Market's Edge, Ltd. in 1994, The Markets Edge Hedge Fund in 2006 and GeoInvesting, LLC in 2007. Through his involvement with the equity markets, he developed the strategies that are now at the core of the hedge fund and geoinvesting.com. He currently leads a team of researchers and analysts (the GeoTeam) that help investors identify opportunities in today's volatile stock market. The team uses fundamental criteria to analyze stocks in the micro-cap to small-cap arena.

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