Eductaional Post - Bid Painting

I think people often wonder why they see bid painting (small amount of shares sold at the bid). It is almost never someone just selling their stock to get funds. That’s because many of these trades, minus commission, come out to zero or less.

Bid painting is done to manipulate the price down. However, in most cases it’s not shorters who are doing this when the stock is on the OTC. A lot of times it’s convertible debt holders trying to lower their VWAP (Volume Weighted Average Price).

Holders of convertible debt want the VWAP as low as possible, so they can convert at the cheapest price. Therefore, they will bid paint or knock small bids out to accomplish this goal. A small bid is when there is only a small amount of shares at the bid.