No vol­ume in small shares

Finweek English Edition - - Letters -

IT’S AL­MOST im­pos­si­ble to in­vest in some of the small com­pa­nies on the JSE, es­pe­cially those on AltX, be­cause the vol­umes of­fered for buy­ing and sell­ing are too small. When vol­umes fall too low, in­vestors avoid the shares com­pletely and vol­umes then fall to zero. Usu­ally the price also falls, be­cause there are still sell­ers left but no buy­ers.

The com­pa­nies should buy their own shares on a per­ma­nent ba­sis and of­fer them on the mar­ket. The earn­ings yield could be com­pared with cur­rent in­ter­est rates in or­der to de­cide at which level it’s worth in­cur­ring more debt and buy­ing shares back or is­su­ing more shares and ex­pand­ing.

When vol­umes start in­creas­ing there should be more buy­ers and sell­ers and the num­ber of is­sued shares won’t nec­es­sar­ily change very much. The com­pany could even make money out of the buy­ing/sell­ing spread. DE­WALD DE LANGE

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