reported quarterly, annually, or in other fillings with the SEC. Please note that this number is often
outdated, as companies can bury shares deep in any number of sec fillings. Another number you may
want to look for is the number of authorized shares. These shares are available for use without a
shareholder vote at anytime, although they will let the SEC know whenever they issue these shares. Yet
another important number is the float, this is the number of shares that are not insider owned or tied up in
options and other vehicles that keep them away from the open market. In the penny stocks world, knowing
how many shares there may be outstanding and always keeping this in mind is critical. We do not screen
for stocks that are potentially being sold short, we know that short sellers are guaranteed buyers at some
point, and are a natural part of any financial instrument.
What we do watch out for is a huge percentage of the companies shares being sold short, which could
potentially raise suspicion of naked short selling. This is when unscrupulous investors sell shares on the
open market that may not even exist. This is obviously not good for everyone involved, and the SEC and
congress are beginning to take steps towards combating this activity. We cannot guarantee the accuracy of
the number of shares outstanding that we post, and in many cases, companies can issue shares in a way
that is quite elusive, and we admit that there will often be more issued, especially when the stock price
goes up. Remember that the company is not selling these shares directly to the public, but rather, issuing
them to corporations and individuals for rendering some sort of service or acquisition, and they in turn may
sell them on the open market.
Also, find out how many Market Makers the stock has. This will give you an idea of how many Market
Makers are available to soak up shares or cash for the specific stock. This is simply another element of
liquidity, and just because a stock has more MM's than another does not mean that it is currently more
liquid, it just means that it has more potential to be liquid. More MM's may allow for smoother trade when
volume does come to a stock, while less MM's will make for choppier, more volatile trade.
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