AM can sell their shares on those secondary markets... am I missing something?
Yes, you are missing something. The secondary market share offerings are controlled by third parties (trusted third parties for the most part). For AM to magic some shares into existence and dump them on the secondary markets would require the complicit actions of at least some of these third parties. Not to mention the number of people that would notice that all of a sudden the number of shares on issue jumping. Doing something like this would destroy the reputations of everyone involved, and the chances of it going on long enough to make it worthwhile is slim.
Honestly, if friedcat wanted to do a dodgy, all he has to do is stop paying dividends and say "so long suckas". He's got the key to the datacentre, if he wanted to screw shareholders he wouldn't need to be sneaky about it.
Wait, am I misunderstanding how this whole thing works?
I thought that Friedcat was the one who keeps track of the direct shares, and his inventory of those shares is not audited. Is that correct?
And it is possible to have direct shares transformed into PT shares, right? And individuals do that legitimately all the time?
If that's all true - Friedcat couldn't get all 200k shares sold, I am sure (nor could the market absorb that much volume in the first place), but I bet he could get ten to twenty thousand through (40k-80k BTC, $4M-8M) before things fell apart. And then all the hardware is his on top of that.