Short and distort
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Short And Distort
An illegal practice employed by unethical internet investors who short-sell a stock and then spread unsubstantiated rumors and other kinds of unverified bad news in an attempt to drive down the equity's price and realized a profit.
Investopedia Says:
Due to recent corporate scandals and investor uncertainty, fraudsters have an easier time spreading doom and gloom by claiming that a firm is losing a very costly class action suit or is suffering from low earnings. In order to prevent being conned, investors should do their own due diligence and be critical of the authenticity of news from unverified sources.
Related Links:
High-quality stock reports needn't be confused with stock manipulators' dramatic claims. The Short And Distort: Stock Manipulation In A Bear Market
Want to profit on declining stocks? This trading strategy does just that. Short Selling Tutorial
Message boards provide a great opportunity to read insightful information and opinions, but watch out for "trolls". Needle In A Haystack: Investing Message Boards
Wikipedia on Answers.com:
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Short and distort
"Short and distort" is a type of securities fraud in which Internet investors short sell a stock and then spread negative rumors about the company in an attempt to drive down stock prices.[1][2] Cell phones and text-based messaging are the primary tools for the people committing "short and distort" as they tend to hide the source of the information.[citation needed]
It is often performed as a form of naked short selling in which stock is sold without being borrowed and without any intent to borrow.[3][4] Once the stock price has declined, the investor uses the proceeds of the initial sale to buy a larger number of the company's shares than sold originally. Some of the newly purchased stock is used to fulfill the short-selling contract; the remaining shares are then offered for sale, which causes an additional decline in the company's share price.
During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price.[5] United States Senator Christopher Dodd said this was more than rumors and said, "This is about collusion."[6] Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with Enron.[7]
See also
References
- ^ Investopedia entry of "short and distort" - Forbes
- ^ Glasner, Joanna. "New Market Trend: Short, Distort". Wired. Condé Nast Digital. Archived from the original on February 11, 2010. http://www.webcitation.org/5nSEkhdBd. Retrieved February 11, 2010.
- ^ Connecticut State Attorney General Richard Blumenthal, cited in Wall Street Disses Regs - Liz Moyer, Forbes.com 25 September 2006
- ^ ‘Market Cop’ Cox Urges Restraint - Directorship Boardroom Intelligence, 18 July 2008
- ^ ‘Short and Distort’ Conduct Scrutinized - Directorship Boardroom Intelligence, 2 April 2008
- ^ "A New Wave of Vilifying Short Sellers" New York Times 30 April 2008
- ^ In a 22 July 2001 hearing of a Senate subcommittee, questions were raised about a "maze of financial transactions that . . . makes Rube Goldberg look like a slacker" to which Chase was one of several banks was a party. Rumors flowed about Chase starting the day after the hearing; on 23 July 2001, Chase's stock prices dropped to a six year low (James Surowiecki, "Short and Distort" The New Yorker 12 August 2002)
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