FundRobot » Trust Funds » Is it illegal to drive down a company's reputation and then short that stock?

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Old   #1 (permalink)
 
Posts: 2,565
Default is it illegal to drive down a company's reputation and then short that stock

??
And also, I was wondering. Say that you have a friend who works in the Business and Finance section of an esteemed newspaper. Is it within the realm of possibility to pay this person money to make articles discrediting a company, entitled something along the lines of, "Company X is expected to abruptly plummet blah blah.." The corroboration for the claims could be based upon sketchy metrics, but wouldn't necessarily be lying as much as a very unorthodoxic, BS standpoint that uninformed investors are likely to believe.

Sorry if this is really ignorant, I'm just a college student who just started short selling..

Stocks4Me is offline   Reply With Quote
Old   #2 (permalink)
 
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Default is it illegal to drive down a company's reputation and then short that stock

There is a federal crime called insider trading, but what you are talking about sounds more like character assassination, which you can be sued for.
Owner101 is offline   Reply With Quote
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Old   #3 (permalink)
 
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Default is it illegal to drive down a company's reputation and then short that stock

That's the way Jim Cramer operated as a hedge fund manager. He didn't know a whole lot about finance, but he was a journalist and knew plenty of other journalists. During the 90's, he would have his journalist friends write bogus stories about companies to destroy their reputation. He would then short the stock of the company (making money in the process), and then reinvest the earnings in the company's stock once it rebounded because analysts found out the stories were not true. He does the same thing on his show. He invests in company A when the price is low, and then tells people to invest on it during his show. As a result, the value and price of the stock goes up (because he said so), and he makes money. He then shorts the stock (once people find out the company has little value), and he makes more money. This is called pump and dump.

What Jim Cramer does is not illegal, but it casts him in a negative light. It's because of this I do not trust anything he says,
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Old   #4 (permalink)
 
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Default is it illegal to drive down a company's reputation and then short that stock

The easiest way to figure if it's a good idea is to ask yourself, "would it be ok if someone did it to me?" Besides all else it's highly immoral. There are better ways to EARN money.
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Old   #5 (permalink)
 
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Default is it illegal to drive down a company's reputation and then short that stock

Paying a reporter to deliberately write a bad (OR good) story is illegal.
The publisher can be found liable for such misconduct and the penalties can be SEVERE.
Stock trading in any way based on knowledge of a reporter's unpublished story is illegal.
Defamation is illegal.
Beauty2000 is offline   Reply With Quote
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