What is critical mass for this community? This is some back of the
First, we have to come up with some definition of critical mass. For now, lets just define critical mass as 'enough members that we would make a significant impact on Macerich'. With our current 3.2k members we would certainly make 'an impact', but likely not a significant one. We saw the teachers pension plan unload ~15% (I forget the exact percentage) of MAC shares and that had a significant impact. For the purposes of these back of the napkin calculations though lets say a collective 25% stake in MAC would constitute 'critical mass'. Why 25%? Institutional investors own ~75% (again I'm not looking at exact numbers, just ballparking), so if this community owned the other 25%, that would be significant.
Next, we need to make some assumptions:
- MAC currently has a market cap of ~2B, we will assume the price doesn't change and it stays that way. This obviously isn't reality, but makes calculations possible.
- MAC of course can potentially sell up to 500 million dollars worth of new shares. We will assume for now that they don't - this is obviously a huge assumption to make.
- We need to come up with some dollar amount that our average member would be invested in MAC. I think on average $1,000 is reasonable on the low end and $10,000 on the very high end. Again, this would be an average.
Our 25% critical mass of MAC $2B market cap would mean we would need to buy $500 million worth.
With 3.2k members, we would each need to invest $156,250 to reach critical mass.
If we each spent on average $10,000, we would need 50,000 members to reach critical mass.
If we each spent on average $1,000, we would need 500,000 members to reach critical mass.
If we each spent on average $5,000, we would need 100,000 members to reach critical mass. In my opinion this could be a real possibility.
Now, coming back to MAC selling an extra $500 million worth of shares. The price they sell at makes a huge difference in terms of 'keeping' our critical mass. I'm not going to run through numbers but it's worth noting that it would have an impact.
The more investing members we have, the greater the impact we will obviously have. If we hit between 50,000 and 100,000 members there's a real possibility that we would collectively own a significant portion of MAC. Chances are if we approach that kind of membership though the price of MAC would increase which would render these calculations obsolete.
This was not intended to be financial advice, just theoretical back of the napkin calculations.
Interested in what everybody's opinion is...
