Dilutors If you have been trading penny stocks for some time, you’ve probably heard the term “dilution” thrown around quite a bit. Dilution hinders a stock from running and can push the price down as well. Dilution is most noticeable when a market maker shows a certain amount of shares at a specific price, but sells much more than the amount shown (soaking up size). For example, VFIN may be showing 10,000 shares for sale but actually selling hundreds of thousands. When I see a market maker who is infamous for dilution on a level 2 screen, it is a red flag. Frequent dilutors include but are not limited to VFIN, VNDM, PERT, and VERT. I view dilution on a level 2 screen the same way I view a resistance level on a chart; price levels that will be hard to break.
Example Here’s an example from last week’s trading of MYEC:
Anything catch your eye when you look at this?
The first thing I notice is market maker “VNDM” on the ask at .016. So, why is this significant? I’ve been watching this stock for awhile, and market makers such as VNDM and VFIN will often sell massive amounts of shares at a certain price level (dilution), hindering the stock from going up.
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