Your,Stock,Support,Budget,Your finance, share, loan Your Stock Support Budget
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Your Stock Support BudgetBy William CatePublished November 1999[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] It costs money to create share buying. Every public company must find thebuyers for their shareholders' stock. You must have the buyer when yourshareholder sells. If your company fails to find the buyers, your shareprice will collapse. To maintain your present share price, your float will trade four timesannually. Your float is the stock held by your public shareholders. If yourcompany's float is one million shares, you must expect to find four millionshares of buying in the next year. If you keep your present shareholders,you'll cut your stock support costs by 100%. If your insiders can't selland thus add to the company's float, you'll reduce your future stocksupport costs by fourfold for every unsold insider share. The annual supply and demand for your company's stock isn't constant inthe Market. You get a favorable write-up. Demand for your stock temporarilyjumps up. A major shareholder liquidates their position. The supply of yourstock temporarily increases in the Market. You need to level thesupply/demand curve. You can often do it by working with your shareholders. Your goal should be to maintain a sustainable share price. Your share price should trade within a narrow range. There's a silver-lining about bad news. If your shareholders hear it fromyou, you'll gain credibility. If they hear it from you, it won't sound asbad as hearing it from their broker, a newspaper article, or in theShareholders' Annual Report. Budget money to spread bad news. It's a soundlong term strategy. A Stock Support Rule of Thumb for OTCBB companies is that it costs a dimeto create a share of buying, when your share price is below one dollar. Fora share price above one dollar add five cents for every dollar of the shareprice above one dollar. This means that it costs a quarter to support afour-dollar share price. Multiply this share cost by your float and then byfour and you have an annual budget for stock support. Stock support and compliance costs are the best arguments against goingpublic. You must convert these costs into a strong share price. You mustuse your strong share price to buy profitable assets for your company. Theprofitable assets must improve your bottomline. If you don't use your stockas money to build your company, your long term shareholders will lose theirinvestment in your company. You'll fail. If you believe that your share price reflects the merits of your company,don't go public. Your share price will languish for years as you await someFundamentalist writer to discover the value in your company. Meanwhile the pragmatic CEO builds value by using their strong share price to buyprofitable assets. It can take twenty years to create a hundred milliondollar private company. It can take 20 months for a public company to buyfor stock a hundred million dollar public company. The option is yourcompany can earn the money, pay taxes, reinvest and grow. Or, you can gopublic, print your own money called stock, and use your strong share priceto buy assets and become a hundred million dollar company. Your decisioninvolves your willingness to spend money to ensure a strong share price.To contact the author: Visit the Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visit the Global Village Investment Club Website:[http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] Article Tags: Strong Share Price, Stock Support, Public Company, Share Price, Strong Share
Your,Stock,Support,Budget,Your