Why are some listed companies so "cheap" in the market? What would happen if I use my money to buy 100% of its shares?
I noticed that some companies have only 100,000 market cap.
And it's listed company that you can even buy its shares easily. The turnover rate is even > 100% which means it has enough liquidity.
What would happen if I use my money to buy all its shares? Just wondering...
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If you buy up 100% of the shares, you become the owner of the company. Effectively, you take it private. Then since you're the owner, you get to make all the decisions, e.g. fire this employee, work on this product, etc. Of course if your decisions turn out to be bad then you are the one who suffers, since it's after all your company's profits that drops.
One thing you won't have to do is justify your actions to the public. Publicly-listed companies have to declare their financials, their plans, etc, because the public is the owner of the company.
Here's an example of a company that was taken private several years ago: Dell. Note the buyout price was 25% above the original stock price - as Flux points out in a comment, you need to pay more to convince all the other shareholders to sell. However, once you own a certain portion of the company, you can compel the remaining shareholders to sell.
You are often obliged to notify the regulator when you have a decent chunk of stock (5% or 10%, say). So, one should take proper advice before attempting this sort of thing. If you obtain a majority of the shares, you can call an EGM (extraordinary general meeting) sack the directors and appoint new ones. Again, there's a whole pile of legal responsibilities that come with that.
In the case of HMNY, since it is in administration you can't appoint directors. It's 99.9% likely that you get a letter from the Chapter 7 trustees explaining that after liquidating the company, paying its creditors and deducting their fees the shareholders will be getting nothing.
Things to consider:
the number of outstanding-shares versus the public-float
the amount of debt that the company has and including the possibility of a preferred share issue
cash expenses versus cash revenue
the stock market doesn't offer a large number of shares at a fixed price
merger paperwork is required with securities regulators
The reason to consider these is that companies are often bought just to get their stock market listing.
You're buying from sellers, sellers are more or less willing to sell
Always remember when you buy a share if means someone was found willing to sell it to you at an agreed price. The quoted price represents the lowest price at which a random buyer could buy one extra share. That price corresponds to the owner that is the most willing to sell.
The more shares you buy, the further you get past those willing to sell, so the more you get to people that aren't so willing to sell, which means higher price, possibly much higher price.
The notion of "Market Depth" conveys this: a shallow market depth means that after buying relatively few shares, you get to shares that you simply can't buy.
Market depth is the market's ability to sustain relatively large market orders without impacting the price of the security
www.investopedia.com/terms/m/marketdepth.asp
Example
Say the company has 99,999 shares issues and a current trading price of ; you might be able to buy the first 49,999 for 1$ each*, but the current shareholder(s) know that selling you that last share gives you control of the company. If they don't want that, then that last share may become very expensive indeed!
*In reality if you start to buy large volumes of anything you'll move the price, but let's keep the example simple.
EDIT:
Let's also think about how much the price might move even without the risk of you owning more than half:
Start price = S0 = 1$
Increase = r = 0.01% per share bought (that's not a lot right?)
Shares to buy = N = 50,000
Final share price = S0 * r^N = 1 * (1.0001)^50000 = 150 $
Total spent = S_0 * (1-r^N)/(1-r) = 1 * (1-1.0001^50000)/(1-1.0001) = 1.47 $m
Set the rate a bit higher:
Increase = 0.02% per share
Total = 110$m !!
That doesn't look so cheap any more!
Yes, if you hold 100% of the shares, you own the company.
But the problem with "buying all the shares" is that you can not buy what isn't for sale. The current holders of those shares need to be willing to sell them. If you try a hostile takeover like that, then you might notice that a lot of shareholders are not interested in selling at this time:
They might assume the price will raise in the future.
They might not just be speculators but have a personal stake in the company. They might be employed there or they might have a strategic partnership with the company. So they don't want it to be taken over by someone they don't even know.
Or they might just not pay attention to the market and overlook your buy offer.
In order to convince these shareholders to sell to you, you might have to offer them a price which is far higher than the price the company is listed at right now.
But you might not even need 100% of the shares to take ownership of a publicly traded company.
Depending on jurisdiction, owning 90%-95% of shares might permit you to perform a squeeze-out - forcing other shareholders to sell to you at market price, no matter if they want to or not.
Owning 50% + 1 of the shares gives you a shareholder majority. This doesn't technically make you the sole owner, but gives you a high level of control over the company. You can now make any decision which requires a shareholder majority by yourself.
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