The vast majority of the float of these companies are held by either large institutional investors or insiders. I doubt very much that they are making their decisions based on what they read on a message board.
I believe there is no way that the combined buy/sell power of members of this board could move the price of any of these stocks on any given day. Would anyone really waste their time in that sort of futile effort?
So, looking at complaints around short sellers trying to force a price down with a grain of skepticism is always useful in my eyes. In the vast majority of cases, it’s not a conspiracy: it’s someone who legitimately is afraid. Or just feels as passionately against a stock as we often feel in favor of a stock. Also, just on principle, it’s often good to hear the opposing side. Even if it’s not an argument made in good faith, if it’s an argument that will influence other investors it’s good to know about it.
But, do I believe that we could move the price of a stock? And, as a larger question, would someone try to influence the price of a stock by posting to message boards? Absolutely. Monday has a relatively volume of 580,000. So, how much does it take to move the price? It depends on how elastic the market is. How many more buyers will there be at at a 1% lower price? 1% 2% 3%? For a tech stock I tend to think it’s fairly inelastic. It’s not like people are trying to buy Monday as a value stock based on the P/E. In fact, since many probably view it as a momentum stock, the more the price goes down the harder it may actually be to find buyers.
I also tend to believe that the vast majority of trades are “reactive”. Examples: HFT trying to outrace order low data, HFT trying arbitrage. Algorithms trying to make trades based on momentum. For that matter, human day traders with momentum and technical plays. Of that 580,000 volume, how much is long term buyers and how much volume is from short term traders reacting? I hypothesize that short term trades can have a huge magnifying effect on the buy or sell order from a longer term investor.
In fact the fact that the majority of shares are owned by institutions and insiders makes it MUCH easier to move a stock price. If the vast majority of shares are owned by people who can’t and/or won’t sell, then the universe of shares that can be persuaded to buy or sell by price swings is very low.
The point being that if the overall volume is 580,000, I personally believe the actual number of shares that need to change hands to influence the price is remarkably low. Even if it looks like there is a lot of market depth on a stock, those buys and sells can be move in literal microseconds if it looks like the price might shift.
And also remember, for every 1 person who posts on this board there are probably 50 who read. If Saul hypothetically posts “those earnings are terrible, I’m getting out” how many sell orders do you think that would trigger? And given the encouragement to be fairly concentrated, how much volume do you think that would trigger. And, remember, if this is a deliberate attempt to move the price, they won’t just post here: they’ll post in a lots of places. Once you write a hit piece, you can post the same content lots of places. This isn’t theoretical, “pump and dump” (and the reverse) are as old as the stock market.
So, that’s lots of words. But the real point is:
- Should we listen to the bear case on our favorite stocks? Yes.
- Can we affect the price of the stock, for a small cap stock? I’m sure we do sometimes. When combined with other investing boards? Absolutely.
- Should we police the board from people trying to manipulate prices? Yes. It absolutely happens.