Recognizing Speculation in Equities – MER Telemanagement Solutions reduxPosted: August 26, 2012
Believe it or not, in the relatively short time-span of approximately one calendar week this is the third posting on this blog that is inspired by the recent extreme volume and price volatility in MTSL, the Nasdaq traded equity for MER Telemanagement Solutions (the first posting discussed crowd-trading and the second posting raised the prospect of making money through the application of daily shorting.)
Normally, posting about one subject on your own blog three times in one week is indicative of some level of obsession, but in this case I think it is warranted by the enormous amount of source material that is emerging in the wake of the extreme volume and price volatility, the associated postings on Yahoo Finance’s message board, and the aggressive pursuit of MTSL by stock-picking newsletters (yes, I am aware that a key treat by people with obsessions is to believe that the obsessions are warranted.) Moreover, as I have explained in this blog’s About section, I reserve the right to publish postings on whatever I want, whenever I want, so I am going to do just that — perhaps (be warned) not even stopping at this, the third posting.
But I digress… Let us get to the subject at hand.
I was once asked how one could recognize speculation in an equity. The answer, of course, is a massive increase in volume of shares traded, turn-over of every single available, outstanding share multiple times in a day or week, and extreme volatility in the per share price price.
(Note: I also have a hypothesis that you can use the relative increase in chatter on a company’s Yahoo Finance message board and/or the increase in abusive ad hominem attacks on such message board to infer with some reasonable margin of error whether or not speculation in the company’s equity is, so to speak, in progress (see my posting on spamming to learn more.) However, I have not tested this hypothesis yet. Another hypothesis that I am fairly sure will hold up to scrutiny, is that multi-day trading activity in the pre-market (a.k.a. the fools’ market) for an equity is indicative that speculation is rampant around the underlying company.)
With respect to trading-volume and share turn-over, MTSL’s float is currently approximately 4.5 million shares (reflecting a reverse split in the recent past,) of which approximately 3 million shares are held by insiders. Over the last months, the trading volume in MTSL has been near zero. Over the five trading days from August 17th to August 23rd, however, trading days volume has been approximately 2.8 million shares, and on August 24th trading volume exceeded 1.4 million shares, making for an aggregate trading volume for six days well in excess of 4.2 million shares. Therefore, on August 24th very single available share of MTSL was, in principle, traded one time and on a six trading-days basis, every single available share of MTSL was has been traded almost three times.
The per share price for MTSL has over the last six trading days gone from $1.6 to $3.9. on August 24th the MTSL per share price opened at $3.52, having closed at $3.3 the day before, and moved between $2.96 and $3.90 for the day, finally closing at $3.12.
This, people, is what speculation looks like. Anyone for a tulip?
For sure, this is going to end with tears – in fact, I think I hear crying already.