Specialists for OTCBB and Nasdaq Companies By William Cate Published June 2000 [http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]An orderly market should be
goal of every public company. Sharp rises or falls in share price attract regulators. A rapidly rising share price feeds upon itself and guarantees a share price collapse. A sharp drop in your share price creates selling barriers. When you attempt to revive your strong share price, your shareholders dump their stock. A steady upward climb, with minor downward adjustments, keeps shareholders loyal. The question isn't how high can you drive your share price? It's how long can you sustain your current share price?
One weapon in your share-price stability battle is
trading of your stock by a specialist. Most U. S. Stock Exchanges use a specialist to match buy and sell orders to create an orderly market. When buying and selling are relatively constant in any U. S. Stock Exchange company,
market is orderly. Specialist can be overwhelmed with selling and this leads to a market correction or a Bear Market. But
matching principle is sound.
The National Association of Securities Dealers (NASD) rely upon their brokers acting as Market Makers to act as specialists. This is
basis to
Bid/Ask price structure in
OTCBB and Nasdaq Markets. The NASD policy doesn't work. The Market Makers goal is to make money for their brokerage firms. Share-price stability is counterproductive to profit, because it reduces trading. The Market Maker needs volume to profit from a stock. Trading volume infers instability as buyers go into a feeding frenzy or sellers panic. Feeding frenzies and panics kill public companies.
If your company trades Nasdaq or
OTCBB, your investor relations person MUST act as a specialist for your stock. They must trade your stock to maintain an orderly market in your share price. Your specialist's job is to maintain
current share price, not to drive it up. Your specialist should have a short term goal in restructuring your shareholder base. For example, EFHCF's current share price trading allows speculators to sell at a profit. However, my goal is to replace
speculators with investors who will hold
stock as it moves up. If I achieve my goal, I'll need less buying to sustain a higher share price.