FDR and the Seahawk Super-Concentration FactorI’m going to name this commentary after a fellow poster whose response this morning led me to an interesting hypothesis. As we might all suspect, the total number of shareholders in a new company should rise over time, other things being equal. More people hear about a stock and buy in, while more insiders divest gradually themselves of shares as the company grows. A neutral phenomenon.
In the case of FDR, let us assume there were 100 shareholders a year ago when the trading halt was lifted, 300 by December, and 1000 today – hopefully including lots of junior staff through those new RSUs. All reasonable guesses.
But whereas there is all-too-often something sinister to be read into a company which goes public so the insiders can rapidly distribute their shares at lofty valuations to an unsuspecting public, what about the reverse situation? A company goes public to raise money, yet the concentration of ownership by the 50 largest shareholders actually goes *up* over time?
I have no way of knowing whether this is happening with FDR, but if so, it may be a new kind of bullish signal. Services tracking listed company insider buying and selling have been around for a while. And institutional holdings totals. But I’ve never heard of one bothering to track whether big shareholder concentration was rising or falling. Probably because it so rarely rises.
Yes, I know, management granting themselves options or RSUs shouldn’t really be included in such calculations. Yet even without counting those new shares and options, FDR is probably seeing a rising top-50 ownership concentration. Seahawk, NextLeg, myself, and who knows how many other early shareholders have increased their positions since first coming onboard.
And the large shareholders are likely the ones most familiar with details of the story, therefore most comfortable buying more shares. And the ones most likely to have the cash to do so.
If I had to estimate the % ownership by the Top 50 today, it would be somewhere around 60 or 65%. This would include institutions, who absolutely fit that description above. As of the last few months, the level of concentration is probably rising.
At some point, maybe around the $5.00 mark, this indicator may finally reverse trend. General guidelines will compel enough casual shareholders to exit. There is nothing wrong with taking profits and/or trying to ride for free. For most stocks. (We hard-core Founders owners think a little differently: buyout here we come!)
Meantime, who knows how much more stock the long-time, deep pocketed FDR shareholders might snap up? We may be on the verge of a serious drought of offers. It was already showing on the full order book Monday afternoon – maybe only 100,000 shares visibly offered up to $2.50. Some were icebergs, to be sure, but prudent accumulators shouldn’t count on that.
If you are not yet done building your position, then perhaps best to make your move soon. “Don’t delay – or you’ll be forced to pay”... through the nose.
For those who have as much as they want, time to sit back and enjoy the show.