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Pastimes : Learning To Invest Correctly - A Shared Experience
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To: Fredman who wrote (117)7/28/1998 1:11:00 AM
From: Druss  Read Replies (1) of 253
 
Fred--The 'acceptable amount' varies a bit, partially according to price. If you are shorting some people I respect have told me a float of 10 million is best to protect you. There are supposed to be 'Short Busters' out there who will look to find a stock with a small float and large short interest and then drive the price up. They then sell the shares they purchased to stricken shorts they are forcing to cover. A low share price would assist a group like this.
Overall I like the 10 million figure as pretty well protecting you from most of the ills of small float. It is not absolute however, share price, daily volume, and the amount of shares held out of the float are all factors.
Share holders on occasion give permission to the company to issue stock for various reasons. This becomes pretty much what you described 'printing up more stock when they need cash.' Far more common and insidious is the practice of giving warrants to employees. This can become a mechanism whereby huge amounts of stock are generated and dumped on the market. Warrants can grant big blocks of stock to various employees so an employee who on paper makes $150,000 a year becomes a multimillionaire with the sale of stock he has been granted. This 'reward' system takes the money the lucky employee makes out of the shareholders stock value. I have no idea how many companies are doing this little trick but it is extremely common.
All the Best
Druss
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