Comments on GRVY Trading Activity Today
Here is my impression of the Gravity news and resulting trading activity today: As a backdrop please note that GRVY:
- Has a relatively low float (number of shares available to trade) which increases volatility.
- Is not covered by many professional analysts or professional traders (I believe they are only covered by one analyst) which may imply a decreased efficiency of the market price equaling the “true value” of the shares.
- Relatively low institutional ownership.
- Has a high beta. Beta is the sensitivity of a stock's returns to the returns on some market index (e.g., S&P 500). For more on beta look here: http://invest-faq.com/articles/analy-beta.html
Stock price reaction to news about companies with a low float, little analyst or professional trader coverage, low institutional ownership and a high beta is often exaggerated. All of the factors listed above can increase volatility. On bad news such stocks will tend to take a short term drop more dramatic than fundamentally warranted. On good news they tend to rise in the short run more than they should. Supply/demand issues will exaggerate these gains or losses when there is a low supply (GRVY has a low float) or when trading volume is much higher than normal (such as today).
Read more on my new blog: http://jdmba.blogspot.com/2005/07/gravity-trading-activity-today.html