|Further Reading||The Best Investing Strategies To Earn Money In The Stock Market and How To Predict Stock Market Crashes|
On rare occasions when a company goes public nobody buys their stock. Several penny stocks that went IPO simply had nobody who wanted to buy their stock initially. Sometimes even large companies that go IPO will have a strong run up and then a cataclysmic fall as the buy orders fill up.
When nobody wants to buy a company’s stock one of 3 things will happen. First, the company’s shares could fall drastically in price because there is a lack of liquidation opportunities for stockholders. Second, with no real buyers, market manipulation could be done by placing false orders. Third, If nobody buys the stock then the stock can become delisted from exchanges.
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Without further ado, here are the 3 things that happen if nobody buys the company’s stock.
If Nobody Buys The Stock Then The Price Of The Company’s Stock Will Plummet
One of the main things that could happen if nobody buys the company’s stock is that it could plummet in price.
This is because a stock’s price is determined by what people want to pay for it. Sometimes when a company goes IPO and first lists their stock people either don’t know about it or don’t want to buy it.
When this happens there simply are no orders placed on what is called the Level 2 order board. This level 2 order board is also known as the “top of the order book” because it displays the closest stock orders to the price on both the bid and ask side.
If nobody wants to buy the stock then their open orders will all be sell orders. This imbalance in the order types will result in the stock’s price falling overtime. If there are two many sell side orders on the book and no buyers then the price of the stock will plummet.
This happened to several companies over the history of the stock market. One such prime example would be Facebook’s Q1 results where over $232 billion in market cap was wiped out overnight on a bad earnings report.
This massive fall in the price of Facebook stock started because there were not enough buyers who wanted to buy the stock after the earnings report. If in this scenario nobody wanted to buy the stock then Facebook’s stock could have lost almost 100% in a matter of hours!
As such, one of the main things that could happen if nobody wants to buy the company’s stock would be a massive plummet in price.
If Nobody Wants To Buy The Company’s Stock The Lack Of Volume Will Lead To Market Manipulation
One of the main things that can happen if nobody wants to buy the company’s stock would be an increase in market manipulation.
If there are no real buyers for a company’s stock then what could happen would be a massive increase in price manipulation from people manipulating the spread of the stock.
This is a real strategy for small investors attempting to manipulate the price of penny stocks on the pink sheets or OTC market.
If there are no buyers then a seller could place a sell order for 1 share at the lowest price to make their order fill first. Then they could have another account buy one share at that exact price. The result would be an instantaneous correction in price to an artificially inflated price.
People will do this on penny stocks over time to show novice investors who are unaware of their tactics that the stock is increasing in value slowly over time.
What ends up happening is that small investors think they will make a bit of money by investing in a small company that is up trending. They throw all of their money into the penny stock and then realize there are no buyers.
This is what we call in the industry bag holders.
Because there are no buyers for the company’s stock, people are free to place whatever price they want on as a buy order. This overtime can create massive price fluctuations that result in a false price.
As a result one of the main things that can happen if nobody buys the company’s stock would be price manipulation. This is one of the more common ways people manipulate stock prices to their advantage.
If Nobody Buys The Company’s Stock It Can Be Delisted From The Exchange
One of the main things that can happen if nobody buys the company’s stock would be an eventual delisting.
All major stock exchanges in the world have a set series of qualifications a company’s stock must meet in order to be delisted. One of these qualifications is daily traded stock volume.
The largest exchange in the world the NASDAQ requires that a stock must have a daily traded average volume of around 2,000 shares over a 30 day trading period to remain on the the exchange.
If there are no buyers for a stock there will be no volume. This is because no trades will be executed. Without trades being executed then not only will the price drop but also the stock will be delisted.
When your stock is delisted then it becomes greylisted. A greylisted stock can be easily bought or sold unless the stock is listed back on the exchange.
This is one of the major traps that amateur investors fall into. If you don’t look for the average volume on a stock you run the risk of becoming a bag holder and then having your stock greylisted from the exchange.
All of this can happen if nobody wants to buy the company’s stock. Trust me, you do not want to have your stock greylisted as you will never be able to resell it without pain.
How To Tell If Nobody Is Buying The Company’s Stock
In order to tell if nobody is buying the company’s stock you need to look at the level 3 order book.
A level 3 order book will outline both the buy and sell orders for a company clearly. Here you will be able to see what the average bid and ask prices are for the stock.
If nobody is buying the company’s stock you will notice one of two things.
First, there will be no orders on the bid side of level 2. This means that either nobody knows about the stock or that nobody is interested in it. You should avoid these stocks as you will become a bag holder.
Second, if you see a bid price constantly changing it indicates nobody is buying the stock. This is because people are attempting to manipulate the stock’s order book. You can determine this simply by looking at the price history of the level 2. Do you notice the bid ask changing every couple hours in response to the ask price? If yes, then that’s price manipulation.
As such you can tell if nobody is buying the company’s stock by looking at the level 2 order book. All brokers have this feature but you might have to call them to find it.
There you have it; an entire article dedicated to the 3 things that happen if nobody buys the company’s stock.
Novice investors often fall for the trap of trying to flip a penny stock not knowing how important volume is to making money. If nobody is buying the stock then the volume will be nearly 0. There are almost 0 reasons why you should ever pay attention to a stock with a volume of 0 unless you’re buying a pre IPO.
Here at ChronoHistoria I aim to publish the best investing articles on the internet. If you enjoyed this article then consider subscribing to the free newsletter and sharing around the internet.
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