Pirates of the Caribbean

From CBS Marketwatch, we have Ciena cuts loss, plans reverse split.

Ciena Corp. on Thursday reported a sharply lower loss in its third quarter and announced a 1-for-7 reverse stock split.

The split is expected to take effect after the close of trading on Sept. 22. The move would reduce the number of Ciena shares outstanding to 84.4 million from the current level of 591 million.

Sounds pretty innocuous, doesn't it?

Here's how it works : they declare that 7 "old" shares equals 1 "new" share. Currently, the stock trades roughly around $4. So the new shares will be worth roughly around $28.

But this seems like a cosmetic change. So why do it?

"I think we're making good progress, but we still have a ways to go," Smith said. He reiterated that the company's next goal is to achieve a net profit, which Smith predicted would happen in the "near future."

Whoa, those waves look a little more ominous now!

No profits, you say?

You may rest assured that even though the stock has a reverse split, the options given to the insiders will NOT be re-evaluated. A quick look on Yahoo! shows that the insiders are furiously selling shares, and the CEO Smith has options exercisable at roughly $2.36 a share. (To spell it out, he would only have made roughly $1.64 per stock option. Now, he will walk away with roughly $26.64 per stock option.)

Ain't that just peachy?

The executives will cash out their options leaving the shareholders holding the empty shell of a company that will "achieve a net profit" in the "near future".

ARRRRR, Avast ye landlubbers!