LIGATT Security International (LGTT)

[jmjr77]

The simple answer is that the lower the price is, the bigger the spread is and the more profit they can make.

For instance, if the bid vs. ask is .001 x .0011, if they buy at 10 and sell at 11, they earn a 10% return. At .0004 x .0005, each flip is now worth 25% to them. Now if it was .0001 x .0002, for every flip that they do, they earn 100%. Now just keep in mind that they are transacting millions and millions of shares. At 100% profit for each flip, this translates into very substantial moolah for them. You have to realize that MM's, especially with pink stocks, make money almost exclusively on the spread and rely on sheer volume of actual trades (flips) and not just volume pertaining to number of shares transacted.

But one may think that they would make a lot more money if they just let the stock price run up... that may be true in the short term, but long-run, they end up "losing". As illustrated earlier, the higher the price, the thinner the spread and the lesser the profit potential. Plus, the more expensive a stock becomes, the less investors are able to participate and the less money flows into the stock, again restricting the profit opportunities for the MM's.

This is why MM's are often notorious for trying to drive the price of a pink stock as close to .0001 as they can.