So what does this accomplish?
I am no market maker, nor an expert on the subject, but I will give you my opinion of the points below. Who knows, I may learn something myself:
1) A faster rising share price
The only thing, I know of, that makes a stock price go up is that there are MORE buyers than there are sellers. (visceversa for it to go down).
The m/m are reacting to the underlying demand/supply forces.
2) Hopefully less volatility
Volatility is the result of the change in the above forces, i.e. changes in MORE buyers, (price going up), and subsequently MORE sellers (price going down). Volatility can be affected by many factors, (news, sentiment of momentum players, etc.) Volatility is a separate concept from direction or trend of a stock.
Volatility:
A measure of the fluctuation in the market price of the underlying security. Mathematically, volatility is the annualized standard deviation of returns.
cboe.com
but much more importantly....
3) The ability for EVTN to move off the OTCBB because of its increase value of the float ( a major listing requirement)
The capitalization of the company (# of shares x price per share), reflects the value of the company that investors are assessing to it, reflected in their willingness to buy their shares at a specific price.
Recently, we witnessed a melt down of the .bomb stocks because the valuation given to those companies could not be sustained.
So in the long run, the valuation placed on a company has to be justified by the fundamentals of the company, not merely the "momentum players".
So in the case of your chosen star, the movement from the flea market to a larger, more reputable market will have to be justified by more reasons than merely a specific valuation of its stock. If not... very soon, the market will realize that the inflated price was unrealistic and therefore, back to the minor leagues is the most likely scenario.
In other words... Value has to be real, not merely a momentum game based on a limited supply of stock, pushed higher by a herd of lunatics.
4) Force the company into making stock splits much sooner to increase liquidity
"Force the company" ? Hmmm... Ah yes... the split (pea) game. On this one, although I agree with Uncle Warren, I must admit, (arguably), that the market does go for the split game and places a premium on stocks that play it... (the theory of this being that the stock price is kept within the range of most investors --so, while largely a psychological tool, I will concede that it works). Psychology does play a large part in this casino.
However, the reality is that this game can only work if the company continues to create value, otherwise, eventually disappointing results will bring it down, and possibly harder due to the larger number of shares at play.
Liquidity has more to do with the ability to convert a specific stock into cash. This will in turn relate with how many participants are willing to buy and sell a specific security and/or contract, than it has to do with number of shares of a specific company.
You can have millions, upon millions of shares of a specific flea (as it is the case in many examples of the penny market), yet its liquidity is near zero, i.e. only very few shares are traded because of the limited number of participants willing to do so.
When it comes to markets, I simply believe that:
1. Market makers are in it for the money, (as they should), not for charitable purposes. They respond to supply/demand forces.
2. Markets are a form of war, competition. No one can expect to be treated kindly, homework must be performed, the smarter is done, the better results are obtained.
3. Value, in the long run, will be established by the balance of supply and demand. (sellers/buyers). While momentary inbalances do exist at specific times, eventually these forces do find balance. (IMO using moving averages and bollinger bands will be most helpful in identifying the different over/under valuations and where balance can be expected. --addmitedly, not always an exact science.)
4. Given the % of fraudulent schams/schemes/games et cetera... Why play the pennies ? As it is, competing in the markets as an individual investor, the odds are against the investor. Why ? a). because the investor does not have access to all information that a professional trader has. b). your trade will have to overcome spread, commissions and slipagge.
Therefore, good homework, instinct, money management and firm decision making are the only tools the investor have available... he/she better use them wisely, eliminating unnecessary b.s. (such as all the stuff that accompany speculating in the fleas), will do wonders to the results of the investor in the long run.
I believe that understanding risk as it applies to investments and its management will allow anyone to understand the foolishness of investing in the fleas.
Lastly... Assuming, all conspiracy theories were true... What is the point of placing oneself in the middle of the "shoot the idiot" game ? (most probably as the target). Common sense dictates me to get out of this stinking place and go to a market where there is more light, in most instances, cockroaches(*) don't like the light.
The above, only my opinion... Personally, I do not believe in the conspiracy theories.
(*)Point of clarification: by cockroaches I mean both; on one side, fraudulent companies and promoters, and if any, corrupted market makers on the other. This is an "assumption".
I repeat: personally I do not believe in the conspiracies. However I am convinced that a good % of the fleas that participate in the pennies asylum are licensed crooks, supervised by dyslexic bureaucrats (who gave them the license in the first place). As for the "investors" who play them... Hmmm how can I be polite ? well... I think they are the hyperlactant lunatics of the asylum, always whining, suffering... but always ready for more of the same... I do not understand it. |
