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Case #34:
The Bloated Float


By Barbara Eisner Bayer (MF Venus)

Opera superstar Renata Callous runs despondently to her dressing room, unable to tolerate the overbearing bravas hurled her way by an audience agog over her heartbreaking performance. Why, earlier in the day, Socrates Oasis abandoned her for that anorexic American floozy, leaving her with a pile of cash, a broken heart and all the Perugina money could buy.

As she heads for her chambers, she brushes by a bloated blob of bilious bombast -- tenor wannabe, Pork Belly, belligerent broker to baritones and basses, filling the space with his malodorous expanse and slovenly, sweaty armpits.

"La Callous," he bellows, drool dripping from his mouth's oily corners, "my condolences on your abandonment. But I have come to lift your battered being from the doorstep of financial ruin."

The diva, spent by self-pity (and shame that her luscious legatos were lacking luster this night) turns her sad face toward Pork Belly. "Help me, dear friend, advise me. I shall do as you say."

"Renata, darling, I have a great company for you. HIGH C CORP. [Nasdaq: HIGHC]. They make throat lozenges that cure laryngitis in just 2 minutes. With a $3.00 stock price and a float of just 8,389,000 shares outstanding, we can make beautiful music together when the large institutions start sucking up this can't-miss baby."

"Float?" Renata queries, quaking like Aida.

"Those are the shares on the open market that are readily available for trading," Pork explains, as he chews a chicken drumstick, casually drawn from his breast pocket. "Most companies have shares of stock that are closely held by insiders and institutions, and these are only rarely traded -- even though they're included in the total shares outstanding. So when this baby moves, it's going to fly, fly, fly!"

Suddenly, the doorbell chimes, and the smiling pixy, Motley Fool, enters, bell-cap jingling, with makeup kit in tow. ("Commedia dell'Arte never looked this good," thinks Renata!)

"Dearest Renata," croons the Foolish voce of compassion and reason, "do not let your vulnerability steer you off-key into the world of stock purchase regrets. You are being misinformed by this lardy, lackluster lout about the company's float -- the number of shares in public hands available for trading -- because:

1) The large float indicates that institutions already have too high a stake in the company;

2) The float is too small. Institutional investors require a large float before they take a position in it;

3) A float has nothing to do with investing; it belongs only in the chlorinated recesses of your swimming pool;

4) Institutional investors are prohibited by law to buy stocks with a market cap of under 30,000,000.

Enter your selection in the field to the lower right, and get immediate feedback on the answer!


The answer is 2.

"Oh, Dio, sobs Renata. "Aiuto." [Oh God, help!]

"Non piangere, o mio bambino caro," intones Motley [don't cry, O my dear little babykins]. "It is never too late to become Foolish. Fools avoid purchasing companies that trade for under $5 and have a piccolo [little] float such as 8,389,000 because a small float means the stock will be more volatile: a large order to buy or sell shares can dramatically influence the stock's price. A larger float means the stock will be less volatile. It's all a matter of supply and demand."

"Grazie, Motley. I will do research on my stocks in the future, and not depend on the bogus goodwill of others to lead me astray. And Pork Belly, would you mind being the stand-in for the last act of 'Tosca' tonight? You know, the part where Cavaradossi is shot by the firing squad?"

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