Replies to post #1724 on Navidea Biopharmaceuticals Inc (NAVB)

[nsomniyak]

The Russell is a set of stocks that comprise an index, like the DJIA or the S&P 500, not an exchange like NASDAQ or AMEX or NYSE. NEOP will continue to trade on the same exchange.

By being included in the index, NEOP will HAVE TO be bought by mutual funds set up to mirror the performance of that index (there are funds that track the Russel 2000 or 3000, attempting to mirror the overall performance of the small cap world, just as there are funds that mirror the DJIA components or the S&P 500).

The funds that track the Russel index, which by definition don't own NEOP now, as it has not been a Russel component before now, will need to buy NEOP. The funds will "rebalance" so that the dollar value of their holdings mirrors the composition of the Russell index in % terms (i.e. if NEOP were deemed to be x% of the total market cap of all 3000 stocks in the Russell 3000, then each fund tracking that index would buy NEOP to the point at which the fund had x% of its capital in NEOP).

The effect is three-fold
1. There is immediate buying of NEOP from these funds (they generally give themselves a couple weeks to get rebalanced--selling the stocks no longer in the index, buying the new ones, and adjusting those retained to the correct new proportions).
2. The funds sit on those shares until at least the next rebalancing. As such those shares, while technically still part of the float, are in fact now held by the index funds and not actively traded, are for practical purposes locked away and not for sale, which reduces the "effective float" of shares available to be traded.
3. These shares are now in "strong" hands from which they will not be shaken out by news, price declines, FDA delays or even fishy FDA Citizens Petitions written by self-serving short sellers.

All 3 impacts are positive for NEOP and NEOP longs.

[sts66]

It's not "Russell instead of NASDAQ", it's Russell AND NASDAQ. All small cap index funds who's prospectus's says they will (generally) track the Russell index must now buy shares of NEOP, and conversely sell those stocks that were booted from the index.

Dunno how big the effect will be in the coming week(s), the funds have a bit of leeway in how quickly they have to change their portfolios in order to mimic the Russell index.

If anything, it will add some buying pressure to the stock, how much and how quickly, I'm not in a position to opine....but you'd think that fund managers would take note that NEOP has been pummeled recently and try to get in a quickly as possible, but they also have to balance that fact with the timing of selling whatever stocks are no longer part of the index (which they're likely down in).

Hope that helps.