Notes

Burying Your Company's Stock


You must bury the shares of your public company to reduce its float. Your investor relations costs will be lower if your public company has a lower float. [See my article The Proper Use of Shares.] fxcm The buried shares will be deducted from the float, and the remaining amount is the effective float. You want to get the effective float as close to zero as possible. If your effective float is zero, you need not find buyers for your float because there are no shareholders selling their stock in your company. This, of course, is the ideal situation. If you want your company to be successful in every aspect, I recommend that you structure the float of your company this way.



Speculators are not investors

American stock buyers, on the whole, are speculators, not investors [http://www.iht.com/articles/529443.htm]. Stocks are bought with the intention of selling them quickly at a profit. Even the U.S. Government realizes that speculation doesn't lead to economic growth. Stock buyers who are willing to hold on to their shares for a minimum of one year pay less tax than those who trade in the Market quickly and sell their stocks. The American Government's tax incentive hasn't altered the speculative nature of the U.S. Market, because long term investors are consistent money losers. I've often wondered why these long-term investors continue to buy and hold shares in such a manner?

Avoiding Having Your Shares In the Market

My over 20 years involvement in North American stock markets have proven to me that Market professionals make more money selling stocks short (betting that the price of the shares will go down and the company will go bankrupt) than they do by buying shares. The textbooks only list one of over two dozen of ways that professionals use to sell short stocks. (I have written a short selling article that lists twenty-four ways to short shares.) The only effective defense to short selling is to ensure that the Depository Trust Company (DTC) in New York doesn't have any of your company's shares in their possession.

When most people buy shares, they leave them "in street name" rather than taking possession of the share certificates. "In street name" simply means they are all turned over to the DTC for safekeeping. Short sellers "borrow" or otherwise rely on the existence of street stock to sell nonexistent shares into the company's market. Public short sellers anticipate paying back the "borrowed shares" at a much lower price when the stock crashes. Professional short sellers do not expect to be able to legally buy back the shares that aren't there and avoid paying U.S. tax on their profits. Your company cannot be sold short if the shares can't legally be borrowed.

If you can prevent your shares from being sold on the DTC by having your shareholders insist that they receive their certificates in person, then your company has a Cash Market. Few companies bother or understand the dangers they run from short sellers. Brokerage firms and DTC try to make it as difficult as possible to create Cash Markets in any stock.


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