Burying Your Company Stock

image

You must bury the shares of your public company to reduce its float. The lower your public company's float, the lower your investor relations cost. [See my article The Proper Use of Shares.] The buried shares are deducted from your float and the balance is called the effective float. Your goal is to reduce the effective float to as near 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. I suggest that if you want your public company to succeed in all aspects, you may want to structure your company's float like this.

Speculators, Not Investors

American stock buyers, on the whole, are speculators, not investors [http://www.iht.com/articles/529443.htm]. They buy stock with the hope of quickly selling it at a profit. Even the U.S. government realizes that speculating does not lead to economic growth. Taxes for stock buyers willing to hold their shares for at least one year are less than for those who speculate in the Market and quickly sell their stock. 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 always wondered why long-term investors buy and hold stocks in this manner.

Avoiding Having Your Shares In the Market

I have been involved in the North American stock market for over 20 years and can confirm that professionals make more money by selling shares short (betting on the fall of the share price or the bankruptcy of the company) than by purchasing shares. The textbooks only list one of over two dozen of ways that professionals use to sell short stocks. I have written an article on shorting shares that includes 24 ways. 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.

Most people who read full report buy shares do not take ownership of their share certificates, but rather leave them "in Street Name". "In street name" simply means they are all turned over to the DTC for safekeeping. Short sellers rely or "borrow" street stock in order to sell shares that are not present on the market. Public short sellers expect to pay the "borrowed" shares back at the much lower cost when the stock collapses. 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. If the shares are not there to be borrowed, your company can't be sold short.

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.