[citation needed] Another is a virtual "stock" which is merely a calculated value that a company uses internally to motivate and compensate employees.
The calculation strips out the fluctuation that would occur for a real stock due to the general market, and is set using only fundamental analysis of the company's financial performance.
In this sense, the stock is supposedly undervalued because it is "in the shadows" as far as professional investors are concerned.
To pass the screen, the stock must be in the bottom decile of market capitalization, have a price to book value ratio in the bottom decile, and meet other criteria.
[2] Shadow stock can also refer to holdings of physical stock which fall outside official reporting channels, for example the London Metal Exchange has reported on global shadow stocks of aluminium and copper which are held by businesses outside of official reporting regimes.