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There is a bit of a back story from a South African perspective on what is happening here. Viceroy research group were the ones to break the Steinhoff scandal[

There is a bit of a back story from a South African perspective on what is happening here. Viceroy research group were the ones to break the Steinhoff scandal[1], exposing gross financial misreporting on Steinhoffs financials and resulting in Steinhof's share price dropping from R46 to R6 per share[2]. I suspect Viceroy had short positions on Steinhoff and made quite a bundle. After tasting this legitimate success, they attempted a similar tactic with Capitec bank, a very successful and fast growing South African bank. They released a research report stating that Capitec has unsustainable and bad debt levels and will soon suffer huge losses due to this bad debt[3]. This opinion was largely unfounded and fears were dissipated with the South African reserve bank making a statement that Capitec's business is sound, but not before capitec suffered a short term drop in their share price.[4] And so Viceroy have hit upon a very lucrative business strategy, and AMD is next in line... [1] - https://www.dailymaverick.co.za/opinionista/2017-12-13-the-steinhoff-debacle-the-biggest-fraud-in-sa-history/ https://www.dailymaverick.co.za/opinionista/2017-12-13-the-s... [2] - https://www.fin24.com/Companies/Retail/steinhoff-drops-to-under-r6-after-joostes-departure-amid-accounting-scandal-news-20171208 https://www.fin24.com/Companies/Retail/steinhoff-drops-to-un... [3] - https://www.dailymaverick.co.za/article/2018-02-02-viceroy-under-fire-for-reckless-capitec-claims-but-others-have-also-raised-alarm/ https://www.dailymaverick.co.za/article/2018-02-02-viceroy-u... [4] - https://www.iol.co.za/business-report/companies/capitec-share-price-still-on-a-downward-slide-13044332 https://www.iol.co.za/business-report/companies/capitec-shar...

slivym 9y ago
Well there's a lot to unpack there. But it's worth noting that there's an enormous difference between doing something like this in South Africa, and doing this in America. Of course the SECs view that any trading on US stocks is under it's jurisdiction, and Section 9(a)(4) of the SEC Act. It's known as stock bashing, it's a fairly usual form of market manipulation and attacking big American corporations like this is a great way of getting SEC attention. So whilst it's potentially lucrative, it's also probably illegal and more a game of when they get big enough to be picked up by the SEC rather than anything else. It's worth noting AMD's stock has not moved significantly right now, and these anonymous, rather weak accusations are unlikely to be effective, which would leave this strategy quite unprofitable. -edit: somehow transposed India and South Africa
- kabouseng 9y ago
  Sorry if it was implied in my post that their actions has my approval or admiration or any other feeling. The purpose of the post was purely sharing some background information I am aware of. For the record I view their actions in the case of Capitec and AMD as attempts at blatant (unlawful??) market manipulation. -edit Oh and there is also a difference between India and South Africa :P
  - slivym 9y ago
    I have no idea where I got India from :)
- dsacco 9y ago
  > Of course the SECs view that any trading on US stocks is under it's jurisdiction, and Section 9(a)(4) of the SEC Act. It's known as stock bashing, it's a fairly usual form of market manipulation and attacking big American corporations like this is a great way of getting SEC attention. Minor nit: while section 9 does deal in market manipulation overall, “stock bashing” usually refers to the activity prohibited by section 9(a)(2), concerning price manipulation through actual trading of securities (e.g. trading collusion to pump prices up). Section 9(a)(4) does concern public statements about securities; to quote it:[1] ...make any statement, which was at the time and in the light of the circumstances under which it was made, false or mis- leading with respect to any material fact, and which that person knew or had reasonable ground to believe was so false or mis- leading. In practice, this is not cut and dry. As a security researcher I’m not personally thrilled about vulnerability disclosures being overhyped, but we have ample precedent for people with a financial interest making polarizing statements about companies. This is the modus operandi of activist investors, and the SEC doesn’t usually go after someone unless their claims are flagrantly untrue. That brings me to my next point: > So whilst it's potentially lucrative, it's also probably illegal and more a game of when they get big enough to be picked up by the SEC rather than anything else. I doubt it’s illegal. More precisely speaking, I doubt a successful legal action will be brought against the researchers. They took a few liberties with the severity of the vulnerability, but there is a vulnerability. The level of dishonesty they’re demonstrating doesn’t categorically make their statements untrue, nor does it quite rise to actual fraud. Hyperbole, sure. But outright dishonesty, no. Reasonable people can disagree about the severity of the vulnerability, but there exists a vulnerability. Similarly, activist investors are historically controversial, and to some extent routinely engage in hyperbole. The truth or falsity of their claims are not typically straightforward. They are not typically challenged by the SEC despite this, even when their actions get widespread media coverage. __________________________ 1. http://legcounsel.house.gov/Comps/Securities%20Exchange%20Act%20Of%201934.pdf http://legcounsel.house.gov/Comps/Securities%20Exchange%20Ac...
jerf 9y ago
It's interesting to point out that the market is continuing to basically not respond to this at all: https://finance.yahoo.com/quote/AMD?p=AMD https://finance.yahoo.com/quote/AMD?p=AMD (click it to the 5 day view, news was released yesterday), despite the fact this has been reasonably widely reported. Bear in mind this was reported yesterday before the transient rise in AMD's value, which has since fallen back. I'm not an expert but AMD's chart looks pretty typical of a normal week to me, not like a chart of a newly-reported disaster. Looking at the one month view, volume doesn't seem all that abnormal either. If they took a short position, they're not making any money, and if they took this out on options they're currently on track to lose it all.

slivym 9y ago

Well there's a lot to unpack there. But it's worth noting that there's an enormous difference between doing something like this in South Africa, and doing this in America. Of course the SECs view that any trading on US stocks is under it's jurisdiction, and Section 9(a)(4) of the SEC Act. It's known as stock bashing, it's a fairly usual form of market manipulation and attacking big American corporations like this is a great way of getting SEC attention. So whilst it's potentially lucrative, it's also probably illegal and more a game of when they get big enough to be picked up by the SEC rather than anything else. It's worth noting AMD's stock has not moved significantly right now, and these anonymous, rather weak accusations are unlikely to be effective, which would leave this strategy quite unprofitable. -edit: somehow transposed India and South Africa

kabouseng 9y ago
Sorry if it was implied in my post that their actions has my approval or admiration or any other feeling. The purpose of the post was purely sharing some background information I am aware of. For the record I view their actions in the case of Capitec and AMD as attempts at blatant (unlawful??) market manipulation. -edit Oh and there is also a difference between India and South Africa :P
- slivym 9y ago
  I have no idea where I got India from :)
dsacco 9y ago
> Of course the SECs view that any trading on US stocks is under it's jurisdiction, and Section 9(a)(4) of the SEC Act. It's known as stock bashing, it's a fairly usual form of market manipulation and attacking big American corporations like this is a great way of getting SEC attention. Minor nit: while section 9 does deal in market manipulation overall, “stock bashing” usually refers to the activity prohibited by section 9(a)(2), concerning price manipulation through actual trading of securities (e.g. trading collusion to pump prices up). Section 9(a)(4) does concern public statements about securities; to quote it:[1] ...make any statement, which was at the time and in the light of the circumstances under which it was made, false or mis- leading with respect to any material fact, and which that person knew or had reasonable ground to believe was so false or mis- leading. In practice, this is not cut and dry. As a security researcher I’m not personally thrilled about vulnerability disclosures being overhyped, but we have ample precedent for people with a financial interest making polarizing statements about companies. This is the modus operandi of activist investors, and the SEC doesn’t usually go after someone unless their claims are flagrantly untrue. That brings me to my next point: > So whilst it's potentially lucrative, it's also probably illegal and more a game of when they get big enough to be picked up by the SEC rather than anything else. I doubt it’s illegal. More precisely speaking, I doubt a successful legal action will be brought against the researchers. They took a few liberties with the severity of the vulnerability, but there is a vulnerability. The level of dishonesty they’re demonstrating doesn’t categorically make their statements untrue, nor does it quite rise to actual fraud. Hyperbole, sure. But outright dishonesty, no. Reasonable people can disagree about the severity of the vulnerability, but there exists a vulnerability. Similarly, activist investors are historically controversial, and to some extent routinely engage in hyperbole. The truth or falsity of their claims are not typically straightforward. They are not typically challenged by the SEC despite this, even when their actions get widespread media coverage. __________________________ 1. http://legcounsel.house.gov/Comps/Securities%20Exchange%20Act%20Of%201934.pdf http://legcounsel.house.gov/Comps/Securities%20Exchange%20Ac...

jerf 9y ago

It's interesting to point out that the market is continuing to basically not respond to this at all: https://finance.yahoo.com/quote/AMD?p=AMD https://finance.yahoo.com/quote/AMD?p=AMD (click it to the 5 day view, news was released yesterday), despite the fact this has been reasonably widely reported. Bear in mind this was reported yesterday before the transient rise in AMD's value, which has since fallen back. I'm not an expert but AMD's chart looks pretty typical of a normal week to me, not like a chart of a newly-reported disaster. Looking at the one month view, volume doesn't seem all that abnormal either. If they took a short position, they're not making any money, and if they took this out on options they're currently on track to lose it all.