Bid Support
What Is Bid Support?
Bid support includes a number of implications inside the financial sector, connecting with both the pricing of financial instruments and a strategy associated with mergers and acquisitions. The purposes of bid support can go from stock price manipulation to supporting a takeover bid during the acquisition of a company.
There are three common definitions for bid support in financial markets. In the first, bid support is a manipulative practice embraced by an individual or group of traders to prop up a company's stock price on the open market artificially. It is likewise a cycle in which a substantial number of orders from various market makers come through on the bid side of a stock, giving the additionally impression of momentum. This can signal a trader to buy the stock who wouldn't in any case, as it gives the impression that it is probably going to rise. At last, it tends to be a reference to services given by accounting and counseling firms to companies making takeover bids for different firms.
How Bid Support Works
Bid support can be utilized to portray market manipulation. In this unique situation, the practice includes market participants making various bids on small measures of a specific stock, with those bids being placed just below the highest bid price posted by market makers. This strategy assimilates sell orders and making an artificial floor for the stock while providing the impression with that a lot of buyers are waiting in the wings.
Illustration of Bid Support Operation
Expect that the highest bid price posted by a market maker for a stock that has been intensely advanced is $1.75. The stock promoter then, at that point, gets his colleagues to place bids through various brokerage firms for two or three hundred shares at $1.70, $1.65, etc. This layering ingests a portion of the selling pressure and keeps the stock from falling pointedly, while the presence of a number of bids placed through various firms gives sellers the impression that demand for the stock is a lot greater than it really is. This might make sellers and short-sellers of the stock reexamine their strategy and move in an opposite direction from endeavors to drive down the stock.
Features
- Stock prices are controlled when either an individual or group of traders — or market makers — by and large lift a company's stock price by buying up different shares and in this manner making a false floor under the price.
- Bid support likewise alludes to the support given by accounting and counseling firms when a corporation is making a takeover bid for another corporation.
- Bid support alludes to strategies utilized in stock manipulation and in the world of corporate mergers and acquisitions.
- This practice gives the impression that the stock is encountering momentum, which could acquire buyers who might have in any case remained uninvolved or persuade sellers to reevaluate their strategy.
