Replies to post #53879 on Anavex Life Sciences Corp (AVXL)

[XenaLives]

What makes you think they have a $5 restriction?

Lots of myths in the market.

[–]jones3316 21 points 2 years ago*

That is absurd. The share price being below $5 is literally the last thing holding institutional investors back from investing.

EDIT: I was interested in quantifying this so I looked into some data pulled from CapIQ. For US companies with market caps greater than $130m (i.e. in the Russel 2000 index) there are 209 companies with a stock price less than $5. Of these companies, the breakdown of institutional ownership looks like this:

Institutions - % Owned [Latest] (%)

Average 36.1

Minimum 0.01

Maximum 96.2

Standard Deviation 22.6

Market Cap. Weighted Avg. 37.5

The most interesting thing is that the market cap weighted average isn't that different than the mean or median (35.2%). Institutions are only slightly more averse to buying smaller companies with a stock price less than $5 than larger companies. Considering that ~36% is a significant chunk of ownership, I believe we can soundly say that a $5 threshold is NOT a real phenomenon.

.....

[–]lamamafia 1 point 2 years ago

You get a lot of retail investors still believing this. I have friends of mine that had talks about the whole "Google" 1000$ price point where the price explodes from there. Or even my dad who thought that a stock would jump after the $5 mark.

Those kinds of "psychological" levels are total bulls##t, and any type of technical analysis based on such things has been proven wrong way too often... but this is all theory.

But a lot of people still believe in those psychological barriers. For stocks with such high prices as Google though, retail day traders are much less frequent, than say for a stock with a price point of $1.50.

So I guess it has an impact depending of how much retail investors that believe such things are into it. In my mind, the higher the price point, the lower the number of knowledgeable retail investors there are and the higher the number of serious investors or institutional investors. People with less than what, $50,000 in assets rarely invest in stocks with high price point. I'm in Google with a smaller portfolio, but I don't consider myself the norm at all. Most people with a good amount of money most of the time pay people to trade for them, to invest for them, to manage their portfolio. And those people know better than technical analysis (oh so I hope !).

Also, some complicated and shady stocks get less media attention than others. I don't see tons of posts about Dupont for example. You see Apple, Coca Cola, stuff like that. Industrial companies that produce things that retail investors are not specifically aware of get a lot less attention by retail investors, at least that's what my intuition tells me.

TLDR: those psychological barriers don't exist in theory, but you must still be aware that some people believe in those and have an impact on the market, whether this impact is significant or not depends on the stock, and the price point.

https://www.reddit.com/r/investing/comments/1pmjk0/is_the_5_threshold_a_real_phenomenon/

[joshalex5]

That why eventually we should shoot up again above $14 not out of the question. If great news comes and law suits vanish then watch out. Why are these institutions buying. Oh maybe they feel we deserve a much higher price.