It should be apparent that the function of market makers is to maintain some trading integrity even in small cap stocks. The fact that these market makers are not on the scene was demonstrated in spades on Friday.
Using two of the larger juniors, we can see what happened. The daily range of Bear Creek (BCM) was $1.53-$1.79 Canadian. That is a 15.6% range around the closing price. I was filled at C$1.68 at midday, and immediately afterward the stock fell to the low of C$1.53 on a trade of 8,000 shares. In fact, I saw the low print as a 500-share trade. The whole C$1.53-$1.60 segment were gnats and really almost phantoms. But still, I tried to fill 4,000 shares more at C$1.58 (inside the spread), but there were no shares. I tried C$1.60. No shares. At C$1.61, again no shares. As the day wound down, BCM closed at C$1.67.
At the closing price, BCM had a market capitalization of $155 million. Incidentally, $43 million of that is cash. I mentioned BCM in my yesterday’s post. Note that BCM traded 276,600 shares spread among 462 trades. Each trade averaged 598 shares, or C$999. That’s a grand total of C$462,000 worth of “liquidation” to create a 15.5% range in a stock with a $155 million market cap.
Obviously there is no market being made, no attempt to balance buyers and sellers. Even a courageous buyer Friday would have had to enter and cancel and re-enter to chase price around, trying to swat little gnats. That’s why exchanges have market makers. One wonders what trading will look like if even the slightest market making reemerges, let alone actual buying interest.
Luna Gold (LGC) lends new meaning to the term “stinky bid.” Here, I was miraculously filled on 10,000 shares near the low at 51 cents Canadian (45.3 cents US).
There were 679,000 shares traded that were spread among 241 trades. That is 2,817 shares, or C$1,409 each. The daily range was 50-58, or 16%. Market cap is $70 million. That’s for an operating mine and a highly prospective district [see my related Denver Forum post]. There’s C$363,000 worth of “liquidation” to push a $70 million market cap around 16%. In this case, a normal buyer (“Canaccord”) showed up later in the session to try and buy a few shares from the gnats. He had a little luck.
You can do this exercise on others; but take my word for it, it looks about the same or even worse.
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