Pitts,
Your understanding of how financial markets is large enough to know you know something, but not enough to know a lot. I'm sorry to be brutal but you take all the wrong stats here. You'd be easy meat on a trading floor.
Firstly, there are 72m shares outstanding (ie those that could be bought or sold if the owners want to). Of those c.46m are owned by CD&R. 68m of those outstanding are owned by 12 institutions, 10 of whom are classic buy and hold investors OR (and this is important) tracker funds.
What this means is that if a stock rises into the S&P500 or similar, an investment company is FORCED to buy it for it's tracker portfolios. When you have a lot of buyers ploughing in, the price goes mental. The flip side is that when a company releases results which are not that great, investors that bought it for a tracker fund (lets say an oil and gas services fund), then they get crucified by the same people.
1.5m are owned by hedge funds who LOVE volatile stocks, especially Citadel. This means they forecast bad results and gamble on the stock getting beaten up. In order to make maximum leverage on the stock, they have to own some so they buy in and then bet against it.
It is important to remember that stock prices are an indicator of 2 things:
1. The actual value of the company. For example Apple trades at several times their annual revenue, Shell at much less. Which is a bigger company? How do you judge that? How do you value that?
2. Sentiment. A business might be fine in the underlying but market sentiment builds it up or kills it. Happened to Lehmans Brothers in 2007, underlying liquidity was fine (overall) but sentiment killed them off. The market thinks CHC is screwed and that is fine, it is the market's right to say so with the share price but do you really think that CHC with revenue of $1.7bn is really an $80m company?
I am not trying to say CHC is all roses, far from it. These results are still bad but they are def better than last years and the owners of the company are in it for the long haul. You only lose money when you actually trade something. Right now CD&R are sitting on a huge paper loss BUT they own the company and are in a position to make money in the future. CD&R will not let this investment fail. I would be surprised if the names on the ownership list were not the same next year.
Last edited by nowherespecial; 1st Jul 2015 at 11:02.
Reason: appalling grammar....