Adams PLC (LON: ADA) is one of those shares where it’s possible to wonder why they’re bothering. Bothering with the costs of having a quote that is. A full market listing can cost in the £250k a year range after all, once we add in extra audit requirements, brokers and so on. Sure, there’s a value in being quoted, you might be able to raise capital if you need it. Or issue shares and options to staff as incentives and so on. But those do rather require a certain amount of liquidity in the shares. People buying and selling them that is.
So, why does Adams PLC bother? Because here’s how liquid the shares are:
Note that the total trade value is not in pounds, that’s in pence. So we’ve actually trade there - this is total value of all shares traded - of £2.20.46, or two pounds twenty and a smidgeon. Again, note, that’s two quid.
That trade had a very significant impact upon the share price as well:
Adams PLC share price from Google Finance
Now it is possible to look at this and think there’s an opportunity. If £2 worth of trade moves the price 24% then how much could we manipulate this price if we tried? The answer is that we could manipulate it a lot, very easily and for not much money too.
However, it would be pretty much impossible to make any money out of doing so. Sure, we could start spending £10 every hour or two on shares and keep going for a week or two. We’d certainly push that share price up. But at the end of a week we’d have a few hundred £ in shares and absolutely no one to sell them to. Because the only reason the price had gone up was because of our own buying.
Illiquidity exists and we often think we can take advantage of it. Be at rest and put that idea out of your head - illiquidity is the enemy of the trader because it means you can’t get out of a position. Find something more interesting to do, in short.