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Hi all, I asked Motley Fool to put up a new discussion board for more advanced questions, and investors. Here's are first post and question by me!
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My question pertains to high institutional and mutual fund ownership on the future potential of a stock price:

While researching a particular stock, I noticed that it was 110% owned by institutions.

First of all, I wanted to make sure I understood correctly that the reason that more than 100% can be owned at all, is because of private placements, shelf registrations, debentures, etc., that allow institutions the ability to own more shares in total (when combined with open market institutional purchases), than the shares outstanding, thus resulting in over 100% ownership.

That being said, and assuming I am correct in that assumption, my next question is what I am really after:

If a company is owned by that many institutions, mutual funds, hedge funds, etc., does this impact the potential price appreciation, or depreciation?

In other words, if so many shares are already "off" the market, will this make the underlying stock more volatile because of decreased liquidity, and in turn, more apt to either rise or fall greatly (like a stock such as ISRG) when catalysts take place?

For instance if this company misses earnings, and shares are sold, will it fall faster because there won't be any buyers (institutions already own full positions), or fall slower because there will be more price stability?

On the flip side, assume the company is a sound one, and undervalued (by my current analysis), is this also a ramification of so many shares already being snapped up by institutions that there really aren't any buyers left, even though the company is still performing well, and undervalued fundamentally?

Since there's no one around to buy shares because everyone that already wanted to get in has bought, does this inhibit the natural tendency of the stock price to rise because there is less buying going on? Or does this produce more price stability, so if a catalyst does arise, say they beat earnings, the price spike that follows, is more likely to "stick" because no one is going to sell into that because they are long term holders of the stock?

Any help, suggestions, comments, etc., would be appreciated. I have seen this played out both ways: stocks with high institutional ownership that have risen a lot over time and kept their gains (AMZN) and others that have high ownership but have sold off over time (YHOO, AKAM). So to be honest, I really haven't see a clear cut pattern.

This questions is really perplexing to me and stopping me from making certain purchases for fear that the "easy" money has been made because ownership is so high already by the market at large.

Thanks,
Chris
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