Contrary ViewsSo, is it illegal to erode the market, by selling, in order to get the price down to the price of a financing? Actually, I don't think so. Neither the goal nor the mechanics of realizing the goal are illegal. Moreover, I think that it is quite common for this to happen, with brokerage houses pocketing the difference between the financing price, $x, and the price at which they sell, $x+. And, in addition, in many cases, they get warrants from the shares that they buy at the financing price.
I'm a small retail investor who once in a while participates in a financing and though it is not my goal to drive the market down, I do contribute, in a small way, to that phenomenon when I sell my shares "at any price higher than the financing price". That is my philosopy and I think every one reading this will understand my thinking. It doesn't differ materially from the thinking of investment houses, though they also benefit from being agents in the financing. The only thing I can see that is potentially illegal about your story involves an assumption, namely, that there was no timely release of information about the financing price. Of course, the rub is that this price mightn't have been set until the price made its way down (to $5.50). In other words, in your example, $5.50 might have been a target, not a fixed price. That investment houses have the power to impose their will on the market, by selling their shares at a discount, but not as great a discount as the financing price, demonstrates, as I suggested above, market power, rather than illegality. I suspect that in some cases investment houses actually start buying to move an underpriced stock up so as to be principal in a financing. Again, I don't think the goal or the method of realizing the goal is illegal, as long as material information is not witheld.
So what we have here, based on your story, is a investment house using its market power to drive down the price for its ultimate financial benefit. Your complaint isn't uncommon and its often made by shareholders who could have participated in a financing but who did not because of the size of minimum investment.
I for one, am not complaining about GLN or its management. The company has done well for me and its business is operating well. I'm actually all in favour of management that concentrates on the business and leaves the market alone. At the very least I appreciate a mangement that doesn't over-promote. I recall, though only vaguely, a story in the National Post financial section of about 4 years ago, about companies that are "promoting" companies, lots of news releases and road shows, and companies that simply let their numbers speak for them. The story was about a study done in one of the prestigous MBA programs and concluded that its the substance of business success that makes the company and not promotion. I think, but cannot prove, that this is more true today than it was years ago. Though investment managers may complain about companies and their lack of communication, it may be that at least some of these managers are really complaining about not getting that edge of information that investment mangagers historically have, retail and continue to get that is denied to retail investors like many of us.
If the intrinsic worth of the company is higher than the current price, that price will move up. Maybe I'm not ambitious enough but that is the way I see it.