What would happen if I tried to buy the entire Russian stock market?

Question

I heard somewhere that Apple is worth more than the entire Russian stock market. Not entirely sure if this is true, but it got me thinking. If I had a bunch of money, and I managed to buy out the entire Russian stock market, what, if anything, would happen to the Russian economy and the world economy? Also, any answers addressing the plausibility of actually managing to pull this off are fine, but my main interest is in the effects it would have on economy.

Edit: If it makes it easier to answer, assume I don't do anything with the stocks, and I bought them at their current value. If there are any other factors that need to be addressed to make it more answerable, let me know.

Edit 2: Okay, so apparently buying the entire stock market is much harder than I originally thought, so now my question is, if someone with a lot of money (I have no idea how much money would be needed to do this and affect anything, presumably at least billions of USD) tried to do it, would this affect the Russian or world economy significantly?

Answer 1

Well, let's think this through. You have enough cash to buy all the stocks traded on the Russian market at current prices. First question: is this in rubles or a foreign currency? If in rubles, it's not clear how you got that much money, so I'll assume a foreign currency.

Essentially what you are doing is transferring a huge amount of foreign currency to Russia. People are correct that stock prices will increase. I expect them to double, so you end up owning about half the market. This is because there is your money invested in the market and the previous money. Some of the previous money may trickle away, but most of it will stay invested. So the market capitalization doubles. Note that some of this will be a result of increasing share prices. Half the stock holders sell out to you, but the remaining stock holders have stock worth twice as much.

Those who do not stay invested in Russia may invest in other countries. This will make them richer but won't affect the Russian economy. The remainder will buy imports. So suddenly Russia will have a lot more stuff. This is deflationary, so the central bank will expand the money supply to compensate. Expanding the money supply will have the side effect of creating jobs. These will mostly be short term jobs, but in the short term, this will cause salaries to pick up.

So the general result is about what you'd expect from a large, one-time infusion of cash. A short term boom. There may be a recession after you finish your stock purchases. The economy will have to readjust to the new export/import balance.

There may be some long term benefits as well. The sudden surplus of investment capital may encourage investments in expanding existing businesses or starting new ones. Since stocks are more expensive but not more profitable, people may try to switch out of them into other investments. And of course, higher stock prices means that corporations can make more money when they issue new stock. These may lead to long term improvements.

Answer 2

Not possible.

The attempt to purchase the stock market in its entirety will decrease supply and increase demand of liquid shares. In other words, the act of purchasing the shares makes the market more valuable. You'll never catch up.

Illiquid shares are be locked up in other investment vehicles. (short sale etc)

Anti-competition laws may prevent you from purchasing shares in the same industry as other companies you've fully purchased.

The company can always issue more shares, since not all shares of a company are put on the public market. Private equity can also be converted to shares. (Employee stock purchase program, Golden Umbrellas)

The share price will exponentially increase, since you're setting a baseline purchase price ("I'll buy them all at the same price") and an intention to buy them all. Investors will raise prices since your demand/goal is to buy all shares.

You might upset several Russian business owners, who will realize their voting share has been diminished. Even if you don't vote, you will need to be identified on several trading documents (Assuming there is an SEC equivalent in that environment) and accounted for depending on the bylaws of the organization.

This influence you have over the corporations will bring both wanted, and unwanted attention.

People with big imaginations should go to Worldbuilders.stackexchange.com

Edit

True the buying the stock market is impossible, but to have a global impact you are probably better off bribing officials to change laws to make the global outcome the way you want.

For reference, see this breakdown of the worlds money.

Answer 3

Let's assume for a second that you have enough money to buy the shares, enough goons to enforce a price consistent with those before your buy-out began, and enough money and goons to buy off or intimidate regulators into letting the sales go through.

You, my friend, have chosen the wrong exchange to buy! Even assuming you're Russian (and you're probably not), a single-owner economy utterly eviscerates the reasons for which the USSR abandoned communism. No promise of competition, no Keynesian fantasy of a rising tide lifting all the boats, etc. There's a real socialist undercurrent in Russian politics, people who think it was a mistake to abandon communism. You're pretty likely to have all your assets nationalized almost immediately. Even more likely if you're not Russian. With absolute certainty if you're American.

You may be better off selecting a humble nation, accustomed to vassalhood. There is a tension, though, between a nation's humility and its military-industrial complex. A more humble nation may be more naturally inclined to accept your economic rule, but will have no real reason to, because you won't own military manufacturers and contractors. Boom, nationalized. A nation with a robust military-industrial complex, on the other hand, gives you a bit of genuine power, but would probably be more resistant to being owned in such a way.

Best bet is America. Huge military-industrial complex and you'd own the industrial half, absolutely willing to follow the rich guy, happy with any pathetic simulacrum of competition... but way too expensive for anyone to buy, even prior to the announcement of the buyout. Find a way to induce a market crash, maybe?

Answer 4

I don't feel any of the existing answers give a very concrete sense of why this is impossible. The basic reasons are similar for any traded good, but are easy to understand in the case of stocks thanks to market microstructure.

Start with a single company. Say you wanted to purchase every share they had outstanding and that was 1 million shares. If you were willing to pay whatever price is offered, as you stipulated in your question, this would be a market order, and would go to your broker and be placed on their order book as 'BUY, 1000000, MARKET.' For an actual transaction to occur, this order needs to be matched against the name number of shares worth of sell orders. Initially, these would not exist. The quote you see on an exchange ticker is the clearing price of the last transaction, which doesn't indicate that you can actually purchase anything at all for that price. You can only purchase what the current holders of the stock are offering.

Say every order book on that exchange cumulatively contained something like this, with an exchange quoted price of $10 per share:

SELL, 10, MARKET
SELL, 10, 10.01
SELL, 10, 10.02

And that's it (to keep the example very simple). Your buy order would first get matched against the market sell order and you'd get your first 10 shares for the quoted 10.00 per share. Your next 10 shares would be matched against the 10.01 limit sell, and the next 10 after that would be matched against the 10.02 limit sell, so you'd end up with 30 shares total for an average price of 10.01 per share. The exchange would now quote 10.02 as the market price, since that was the clearing price of the last transaction. You'd have to wait for someone else to sell, and they'd only sell for at least 10.02.

I think you can quickly imagine how this process compounds itself and your giant market buy order would only cause the price of the stock to exponentially increase until everyone with liquid shares sold them to you, with the smartest sellers noticing you have a ridiculous order and only offering you shares at a ridiculous price. There is nothing at all forcing them to offer you shares at the market price quoted on the exchange at the time you placed the order. You can see how you'd need quite a bit more, maybe impossibly more, than the current market cap of the company to actually buy the entire company.

In practice, to take a company private, you don't need to buy every share. You only need to deregister with the exchange. The rules for when you're allowed to do this vary by country. In the U.S., it is currently when you have fewer than 2,000 shareholders or the book value of your assets has not exceeded $10 million for the past three fiscal years. Of course, you'd need control of the board, which in most cases requires a controlling majority of voting shares. Instead of placing a market order for all shares outstanding, you'd privately negotiate the takeover with a sufficient number of shareholders to gain a controlling majority, and they'd understand you don't have an infinite bankroll and can only pay a reasonable price, and they aren't going to get a better price from any other buyer (assuming this is actually true, because they won't sell to you otherwise). Once you have a controlling majority, there is probably no good reason to try buying out everyone else until you're the only owner.

Answer 5

Given the basic economic theory on supply and demand, you may end up paying several thousand multiples of Apple's value. Marginal cost of shares rise as supply declines. In any case, you will not own all the issued shares in Russian stock exchange as the government regulates the marked more closely in Russia than elsewhere.

Answer 6

Rather than picking Russia, I'm going to choose an arbitrary country for which I can find the regulations on such things: Regulations on stake building and mandatory offers

You don't actually need to track down every share owner and make them a personal offer, however they're free to refuse your offer until you control around 90-95% of shares (depending on country). National monopolies and mergers commissions might have something to say once you start buying up multiple companies in the same industries so you'll have to get into some quite comprehensive bribery in the long run.

To answer the actual question: Unless you started messing around with the way the companies were run it probably wouldn't make a difference to the economy except for upsetting a lot of stock traders. Shutting down speculative stock trading may actually improve the overall economy but unfortunately I can't find the appropriate references to show that.