When it comes to the stock market, forming a concert party can be risky business. In some countries, it's illegal to form such a group that has intentions of taking over a company or manipulating the value of a share or commodity. However, other groups (like the board of directors, subsidiaries, and the parent company) are understood to be acting in concert (or working together) which is entirely legal and almost expected. Read more about how to form a concert party to see if it's the right choice for you.
Gather a group of like-minded investors. The first step in forming a concert party is to find the right people for your group. Talk to other investors who may share your interest in controlling your target company. Look in online forums or talk to people in your own personal social circle. Find people you trust, who you are confident in, and who can afford to much the necessary investment. Remember to keep your plans to form a concert party under lock and key so that you won't fail before you begin.
Have each member buy shares. The next step in forming a concert party is to get each member of the concert party to buy a specific number of shares. This number is very important, as it should be just below the statutory level where a shareholder must declare his interest in the company.
Take advantage of your position. Once your concert party has accumulated enough shares in a company, it has a lot of power. The accumulated shares should provide members of the concert party with enough voting shares to hugely impact the way the company is run. Use your newly-acquired power as shareholders to do the following:
- Manipulate share prices. By owning the majority of the voting shares in a stock or commodity, a concert party can determine which direction the price of the company share will take.
- Influence the management. A concert party can also affect the management of a company. Those who own the majority of the shares in the company are entitled to take part in decisions made on behalf of the company, and they can also attend meetings where they can have a strong say in how the company is run.
- Start a takeover bid. Perhaps the most threatening power of a concert party, a takeover bid allows those in a concert party to essentially takeover the company. It's a risky move, and not one that anyone will take lightly.
Understand the risks. Although it's not illegal everywhere, forming a concert party is highly looked down on in most countries. There are security organizations that are hired to watch the actions of investors so that those attempting to form a concert party can be observed and stopped for any illegal activities. Know what you're getting yourself into when you decide to form a concert party.