What is a bad share day? Could it be…
In each of these cases, what you expect to happen - hasn’t happened.
You talk to the top 20; no one is selling, but no one’s buying either. There are some decent amounts of stock involved but who's actually responsible for all this? How do we prevent bad share days?
Step 1 - Changing how you view your registry.
It’s fair to say that 99% of issuers scan their registry and sort it by holding size, largest to smallest. Do you ever think “if I just talk to these 20 shareholders that constitute 75% of my stock, I’m doing a good job!”.
For the most part, this is true and it definitely helps in the long run but there is more that can be done here. Retrieve a 3-month movement report and sort it by stock sold. I imagine you won’t know 75% of these top sellers.
They might be traders or maybe they’re small holders - either way they’re all having a bigger impact on your share price than the top 20.
Step 2 - Understanding your TMR.
Introducing ACME Corp, our fictitious $50m market cap publicly listed company. They trade thinly, $20k a day, and typically sit with $100k in the bid and offer and offer at any point.
Their issue is that when someone wants out of the stock, it can hurt badly. All other factors held equal, If someone sold $30k into the bid; it would send ACME Corp’s share price down 5%. That’s $2.5m of equity value for $30k traded - an 83 TMR (Trade to Market Cap Ratio) - which means the market cap impact is 83 times the trade volume.
Step 3 - Who can impact your share price?
You’d think that a shareholder with $3k can’t really impact your share price or a shareholder with $300k could decimate your share price. Or are these figures arbitrary and it really depends on how thin your company trades?
Whatever TMR figure you can approximate, shareholders outside the top 20 with influential levels of stock can really big drop in share price, and in the case of ACME Corp, a shareholder with $30k could really give them a bad s(hair) day.
So go back to your registry and stop concentrating solely on the top 20. Instead, focus on the shareholders whose actions will sting through the amplification of your TMR. Treat them the same as your top 20, as they can have a large impact - both positively and negatively.
Sure, this could increase your list from 20 to 120 investors, but engaging with them will drive a fantastic impact on your share price. Less big selling, maybe more big buying, and fewer bad s(hair) days.
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