The last 18 months have all been about an imbalance between supply and demand that sprang from the 2009 private placement. During calendar 2009, total reported trading volume was 7 million shares and in December of that year the company sold 45 million new shares - over 6 years of trading at historic volumes.
When the resale registration statement for the new shares went effective in April 2010, the price plummeted as private placement investors who hoped for a quick profit on their investment began selling. During calendar year 2010, reported trading volume ramped to 22 million shares and so far this year reported trading volume has been 53 million shares. If you assume a double count because of the way the OTCBB works, the number of shares that have moved from sellers to buyers since the registration statement went effective is just a hair over 36 million.
Anytime eager sellers push shares into the market too quickly, the price falls. Over the last 18 months there have been far too many eager sellers and some of them had very large positions. The only good thing I can say about big stockholders who sell is that over time they become small stockholders and then they become strangers because they don't own shares anymore.
It's easy for investors to look at history and try to find somebody to blame for the selling pressure. Over the years I've learned that the only people who really count are the buyers because they'll be with us until their investment goals are satisfied or they grow tired of waiting. Given the trading patterns over the last 18 months I have to believe that the 36 million shares of buying power has come from thousands of retail investors who see Axion as a risk investment, but are willing to give the company time to mature and bloom.
All companies go through cycles where first there are too many sellers and not enough buyers and then there are too many buyers and not enough sellers. That leads to a market dynamic where companies are undervalued for a time and then overvalued for a comparable period of time (or at least a comparable number of shares traded). The cycle keeps repeating itself with successively smaller swings until the stock price stabilizes around a "fair value."
Based on all the publicly available information, I believe Axion is very close to an inflection point where the stock will make the transition from undervalued to overvalued. I don't see many of the people who bought over the last year trading out for a 25%, 50% or even 100% gain. Instead I think that most are looking for a multi-bag return on their investment. The pain of childbirth is almost over. The next step is the joy.
