To: Banditjrjr who wrote (2503 ) 3/1/1999 11:24:00 PM From: Stephen Goldfarb Read Replies (1) | Respond to
John: What makes a stock price rise is the discrepancy between demand and the currently available supply of shares. Even though the float has increased, there are a number of factors that may still affect demand and available supply at the point the trades are made (i.e., at the market maker). It is an auction market. It depends on how many shares show up at the auction, not the ones that are out there. In part it is a matter of in whose hands the shares are held. If the shares are mostly in accounts intended for intermediate to long term holding, that may restrict the number of shares made available to sell (supply). Fewer will show up at the auction for sale. Therefore, it does not necessarily follow that an increase in the float requires a corresponding increase in the shares traded to cause the share price to increase. If the company is perceived primarily as a vehicle for short term trading, then one might expect selling pressure to occur after a brief run up. It would then be more difficult to sustain a price rally.
