If a group of millionaires decided to buy $5million worth of shares monthly + regularly for a particular company. 1. Will you buy the shares? 2. What will happen to the share price? ? - Seedly

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Asked by Anonymous

Asked on 13 Feb 2019

If a group of millionaires decided to buy $5million worth of shares monthly + regularly for a particular company. 1. Will you buy the shares? 2. What will happen to the share price? ?

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Isaac Chan
Isaac Chan, Finance at NUS Business School
Level 8. Wizard
Updated on 07 Jun 2019

Here’s a quick response to your answer.

Will I buy the shares? Not necessarily. Simply because millionaires decide to buy the shares does not mean that you should do it as well, since they may not be good investment decisions.

Rather, you need to determine what would be an appropriate strategy for you, which depends on your investment goals, such as how long you want to hold an investment, or how much risk you are willing to take on. Your goals therefore should be your guiding principles in terms of your investments. However, you did present an interesting scenario here. If I were you, I would probably investigate if these shares are currently being undervalued, and if the share prices will increase over time, before making an investment.

Share prices are always affected by the forces of Demand and Supply. If there is more demand than supply, then share prices will go up, and the converse will happen if demand is less than supply. Hence, we would need to analyse both demand and supply forces before forecasting whether share prices will go up or down. However, if in the scenario you provided, only demand for the shares increased by the purchase of shares by the millionaires, then share prices will go up if supply is constant.

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Question Poster

13 Feb 2019

Thank you for your reply. Will there be anything you would add if we are talking about a blue chip. And based on a year’s trending, the share price have somewhat stabilized at that range.
Lee Jin Fei Andre
Lee Jin Fei Andre
Level 3. Wonderkid
Answered on 14 Feb 2019

What I could say is the other posters are right in their responses. Personally, I would follow, because higher buy volume is also a sign that people see additional value in the company's future hence they are buying now. It only makes sense, provided the company is stable and without any red flags, but you'll never know...

More importantly, even if you followed, would you ever know when these millionaires are going to pull out their investment? If you can't tell, and don't pull out yours in time as well, I would say you're in the run to lose big. (Assuming the trades are legal and not any ploy for manipulation etc).

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LB Sheng
LB Sheng
Level 2. Rookie
Answered on 19 Feb 2019

Short answer is yes. For speculation purpose. Since usually $5M could rather push the share price upwards for short term and you may ride the wave.

In long run, it is not easy to predict as any business has potential to go bad.

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You may open a CGS-CIMB Securities trading account and access the iBillionaire feature, and see what happens to the share price.

With iBillionaire, you can:

  • Discover the stocks owned by Billionaires
  • Review daily and yearly performance of Billionaires
  • Know the Daily Losers and Gainers
  • Learn how much of the company a billionaire owns, how many shares and at what price they made the transaction

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LB Sheng
LB Sheng

19 Feb 2019

is it an ad?
Lim Chun Long Jimmy
Lim Chun Long Jimmy

20 Feb 2019

No, it is not an ad. It is a feature for all CGS-CIMB Securities trading account holders.
Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 6. Master
Updated on 07 Jun 2019

Do you share the same line of thought that is compiling this group to purchase the shares? Even so, you need to do your own due diligence first. The big and regular purchases may cause a big jump in share price, which may trigger an investigation by sgx.

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Question Poster

13 Feb 2019

Thank you for your reply, putting law aside. If this fund is a blue chip fund will there be anything you would add?
Jonathan Chia Guangrong
Jonathan Chia Guangrong

14 Feb 2019

I'll assume you are referring to a unit trust. If this is the case frankly I won't be able to advise much. Not sure if significant buying/selling into the fund will impact the nav much as I do not have the interest to evaluate funds other than to scrape part of the surface as part of my day job.