Many times when I want a large position that I know I am going to hold for a while, I buy directly from the company. it ties up the shares, but it gives the company much needed cash, and they normally offer the shares at a decent discount to the current market.
However, selling them is tough. Most firms won't TAKE the restricted shares, even after lifting the restriction. You can't go to Etrade or TDA to sell those shares. So you are forced to use specialty houses. They charge me 4% to sell the stock on ones that are low like this (And yes, I buy AND sell ones this low) I can also do retail buying and selling at Etrade for a mere $4.95 per trade, but if I want a good large position, I many times do a private deal. Then, if I buy the restricted shares, after six months I pay to get an attorney to write a legal opinion to say I can qualify for a Reg 144 sale, I pay the transfer agent to review the legal opinion and lift the restriction, I pay the transfer agent to DWAC (transfer) the shares to the brokerage account, I pay (a lot) to the brokerage to review the work already reviewed by the transfer agent and accept the stock, and then I pay to sell the stock. Oh, and the 4% is NOT the full commission either. Most of the trades are done through a secondary MM. These are the infamous t-trades that you see. So if I sell 5,000,000 shares at .007, for a sale of $35,000 that day, they will fill it throughout the day (on MMs like VNDM or someone else that does the t-trades) and then the MM who did the deal sells it after the market close AGAIN to MY broker. That trade will be done at an odd number, after market close. Say $.00683 per share. Finally, I pay 4% to my broker on that net number, and I net $.00656 per share. I get about $32,784 for my $35,000 sale. PLus that sale may have cost me about $2,000 for all those first steps to get the free trading shares to the broker in the first place.
So when buying from the company you HAVE to get a discount, because you really net about $30,800 on a $35,000 sale. Yes, it is expensive to be the buyer of private stock or convertible debt.
Now you know more about where the t-trades come from AND how small entities like mine buy into stocks when we want to take a decent position.
Or we buy in the open market. And that is another post, but I have two distinct strategies to do that.
