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Martha Stewart Living Omnimedia Inc. Message Board

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  • apostate_001 apostate_001 Jan 6, 2006 10:13 PM Flag

    Price Manipulation

    In posing this question/issue/thread regarding price manipulation, I likewise figure there is nothing illegal going on.

    And, yes, I understand that the 'float' is small. But Sandy's reply that "Traders and hedge funds can have a field day" is vague. I'm trying to understand the details about what they (and who are 'they') are doing specifically, if indeed they are successfully manipulating the price.

    Perhaps my problem is that I just don't understand the logic of such manipulation. If a deep pocket is trying to protect a long position that is obviously underwater, does it really make sense to throw more money down the rat hole with the intention of manipulating the price upward -- temporarily at best. It takes serious money to jigger the price even a little bit. For example, in the last half hour of today's (Friday's) trading, somebody bought roughtly 300,000 shares at more or less $18.37 (i.e., $5.5 millon $$). That looks familiar and suspicious to me. However, who is willing to put out money like that to move the price by a few cents -- temporarily? Most of my friends wouldn't spend $5.5 million unless they truly believe in the merit of the trade.

    I'm not trying to argue with anyone to make any point. I don't know what to believe. I'm asking for more information about the allegations of price manipulation that I've been reading on this board, hoping to get a better insight into what is happening behind the scenes with MSO.

    (Incidentally, I hold puts that are in the money.)

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    • Regarding the thread of 'Price Manipulation', Mr. P. Ant replied: "Here is the deal. Under 'Key Statistics', MSO has a negative float. ... there are no sellers due to the float. .... Shorts that want to cover, and fools that want to buy in, must pay an artificially high price."

      ===
      My first question is ... what the hell is a NEGATIVE float?

      Investopedia defines a company's FLOAT as: "The total number of shares publicly owned and available for trading. The float is calculated by subtracting restricted shares from outstanding shares. Also known as 'free float'." Per this definition, MSO's float is 51.7 million shares. Yah, I wish.

      Investopedia also says: "the term 'float' refers to the regular shares that a company has issued to the public that are available for investors to transact." Under this more realistic definition, we need to remove (at least) what Yahoo Key Statistics calls "Major Direct Holders - forms 3 & 4" (i.e., Martha and Friends), which is--according to Yahoo-- 3.54 million shares owned by these insiders, thus reducing the real float to 48.2 million shares (51.7 - 3.5). This seems wrong. I thought Martha and other insiders hold something like 60% of all MSO's outstanding shares. Yahoo's same Key Statistics page also claims that the Percent of Shares Held by All Insider and 5% Owners is 116%. How can they own more than 100%???

      What are the correct numbers? What precisely is MSO's float?

      • 1 Reply to larryttopliss
      • Regarding the thread of 'Price Manipulation', Mr. P. Ant replied: "Here is the deal. Under 'Key Statistics', MSO has a negative float. ... there are no sellers due to the float. .... Shorts that want to cover, and fools that want to buy in, must pay an artificially high price."

        =========

        Mr. Ant, my second question is: OK, maybe there are few sellers who will accept less than $18 for their shares (volume does not support that theory). But, where cometh the Buyers who seem willing to pay $18 or more for MSO shares. Who's coughing up their cash (more than $12 million each day on average) for this trash? Who are these guys? Isn't this the more important and mysterious side of the trades we are seeing each day?

        Let me try to list the possible explanation for who are today's buyers?

        FUNDAMENTALISTS. Given the ridiculous statistics for Book Value, Past Losses, Small Estimated Future Income, and any ratio one chooses to place emphasis upon, no one will ever convince me that Fundamentalists are collectively generating $12 million each day to bet on MSO. There is not one positive data item to be found within MSO's financial statements that any fundamentalist could embrace.)

        TECHS/CHARTISTS. Perhaps some techs are thinking they see something in their charts. But what? MSO fell of a cliff in Sept. and Oct. and then has went sideways since. I don't see any head and shoulders, teacup, or anything else in these charts that could generate $12 mil each day.

        INSTITUTIONAL BUYERS. Unlikely. Very unlikely. There are probably far more institutional managers wanting out rather than in.

        SHORTS. Yahoo Key Stats claims that Shares Short as of 12-Dec-05 was 6.84 million shares. It also claims that Shares Short the prior month was 6.97 million shares. This suggests that during Nov. and Dec.--the period when this board had lots of price manipulation complaints--the shorts, in general, were not covering (i.e. the Short positions trying to cover could'nt be the ones proping up the price, as Mr. Ant's reply suggests.)

        MARTHA'S FANS. Mr. Ant's reply appropriately refers to this group as 'fools'. But, I have my doubt's that they are the group that is propping up MSO's share price. I doubt that have the money. K-Mart sales don't suggest that Martha's Fan Club are such big spenders, willing to reach for their checkbooks.

        In summary, from Oct 27 (when 3rd Qtr losses were disclosed) until the present, there have been 47 trading days, during which MSO shares traded between $17 and $21--to my great suprise. Assuming an average of 600,000 shares traded per day and an average price of $18, this means that trader's collectively spent $507.6 million (47days x $18 x 600,000 shares > 1/2 MSO's market cap) during this period buying long positions in MSO's shares. I repeat my question. Who are these guys?

 
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