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Inferno31

3,790 Posts.

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29/05/15

09:51

Post #: 15374231
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Originally posted by Sceptical Prophet ↑

My 2c. I don’t buy the “disgruntled insto” theory. I’ve worked at 3 banks, and 2 of them are bulge bracket IBs. I have never seen any attitude where someone will get “disgruntled” and take a loss. Everyone wants to make money for their client or they’ll end up having to deal with the sh*tstorm when the client calls. My current firm had a few weeks of high pressure put on by High Net Worth clients when our research indicated buy on a new stock and the IPO didn’t go well. Was a headache for everyone.

It is possible that individual advisers would go against firm research and advise a sell. There are a few childish advisers, but they’re still money driven. They won’t easily take a loss.

The reason I think this is insto dumping is for more rational reasons. They want to make money.

A lot of warrants/options still exist. These act as insurance on holdings.

They want to make big profit and small cap companies generally don’t have enough liquidity to satisfy an insto’s budget. Warren Buffett has talked about this. The advantage of being a small buyer is that you can always get your parcels filled. An insto that wants to buy $100M worth of shares is going to end up buying out 2/3s of the entire company (and no one will sell them that many shares). Instos don’t play with small values like $100k. Waste of their effort and time – their staff costs would be higher than the profits. What’s the solution? Get people to sell so you can acquire more.

So you destroy the share price by selling your holdings in a way that creates fear and panic amongst retail investors. And it works. Just look at these forums. We’re down for a month and everyone’s panicking. 1 month considering most people were meant to be holding this until at least IPO at end of year, if not for 3 years waiting for a takeover. How can they risk selling these shares for a loss? Well if they screw up, they can still buy back in on the way up with their warrants (see point 1).

The way I see it, no retail investors on their own has the amount of volume required to hurt the share price this much. It is obviously selling by the instos. The question is why would they sell?

To lose money

Not likely

To make money

Very likely. How can you make money by selling? Either your entry price was very very low or you want to accumulate larger amounts at cheaper prices.

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Excellent post !!!
AJX Price at posting: 51.5¢ Sentiment: Buy Disclosure: Held
3 Upvote

0 Great analysis

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