4 ms·

I like they put their money where their mouth is and shorted GE. Actually puts their skin in the game before making accusations.

joncrane 7y ago
By the same token, people who buy the stock before engaging in "pump and dump" have skin in the game before making their statements.
kingnothing 7y ago
I wonder if that could be considered securities fraud. They had insider knowledge that their report would damage the stock price of GE.
- sokoloff 7y ago
  Is it insider knowledge? Or merely non-public knowledge that they legally generated from their own research efforts?
  - jdmichal 7y ago
    If the information was synthesized from public knowledge, then it is fair game. Non-public is not determined by "how many people know this information".
- one2zero 7y ago
  Prior to the initial distribution of this Report on August 15, 2019, the Company also submitted this Report to the U.S. Securities and Exchange Commission’s Whistleblower Program and the U.S. Department of Justice’s FIRREA Whistleblower Program. Both or either of those submissions may generate profits for the Company independent of the financial performance of GE and/or the securities, derivatives, and other financial instruments of, and/or relating to, GE.
- dboreham 7y ago
  Actually this is standard practice in the shorting industry and perfectly legal since the information is publicly available. It was entirely their goal to push the stock price down just as there are legions of folks trying to do the opposite (in perhaps not so immediately obvious ways).
- zaroth 7y ago
  If you hold the stock and make a knowingly false statement about the stock in an attempt to move the market, particularly without disclosing that you hold the shares, it may be securities fraud. The line is very difficult to draw between constitutionally protected speech and securities fraud. [1] [1] - https://scholarship.law.missouri.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1683&context=facpubs https://scholarship.law.missouri.edu/cgi/viewcontent.cgi?ref...
- hyperpape 7y ago
  Short answer: probably not unless they're willfully lying. I posted a column related to short-selling a while ago. https://news.ycombinator.com/item?id=18017060 https://news.ycombinator.com/item?id=18017060.
- driverdan 7y ago
  So long as the information is public it's not insider trading.
- elthran 7y ago
  To paraphrase Matt Levine - everything is securities fraud
- okmokmz 7y ago
  >They had insider knowledge No, as the author stated all of the information used is publicly available
eledumb 7y ago
duh, whether it's true or not when their accusations are release the initial knee jerk reaction from the sheeple will be to sell which will drive down the price. Shorting GE before making the accusations is profiteering in my book. If it turns out they were wrong they'll still be able to make money on the short, buy back in with the profits and then when the stocks rebound they cash in again. The entire stock market is a ponzi scheme for insiders.
- NikolaeVarius 7y ago
  > If it turns out they were wrong they'll still be able to make money on the short, buy back in with the profits and then when the stocks rebound they cash in again. Explain
  - rwc 7y ago
    It's simple: GE is down, as of right now, over 11%. Knowing the sensational allegations of the report would have a short-term deleterious effect, they shorted the stock. They can turn the profit from the successful short around into buying GE at its depressed price, and profit a second time when the stock returns to normal levels after the report is found to be exaggerated. This assumes the report is, in fact, exaggerated.
    - elliekelly 7y ago
      That would be market manipulation[1] and a violation of the Exchange Act[2]. [1] https://en.wikipedia.org/wiki/Market_manipulation https://en.wikipedia.org/wiki/Market_manipulation [2] https://www.law.cornell.edu/uscode/text/15/78i https://www.law.cornell.edu/uscode/text/15/78i
- jcfrei 7y ago
  No, if Markopolos's allegations are correct then this is exactly how financial markets are supposed to work. They are about price discovery - the reward for this information integration is the profit that Markopolos and the Hedge Fund have made / are about to make. If these allegations prove to be baseless then they will receive a hefty fine by the SEC which I'm sure will at the very least take away any profits they've incurred.
the_watcher 7y ago
Isn't it more the reverse? They shorted GE, so now they're well positioned to reap the benefits of convincing other people to short GE, regardless of the truth of the accusations.
pbourke 7y ago
That's sort of the whole point of these things. Not like they're writing this report for free ...
bart_spoon 7y ago
Also creates an financial incentive to try and spread FUD to tank the stock. "Skin in the game" is overrated. It inclines one towards partiality rather than impartiality.

joncrane 7y ago

By the same token, people who buy the stock before engaging in "pump and dump" have skin in the game before making their statements.

kingnothing 7y ago

I wonder if that could be considered securities fraud. They had insider knowledge that their report would damage the stock price of GE.

sokoloff 7y ago
Is it insider knowledge? Or merely non-public knowledge that they legally generated from their own research efforts?
- jdmichal 7y ago
  If the information was synthesized from public knowledge, then it is fair game. Non-public is not determined by "how many people know this information".
one2zero 7y ago
Prior to the initial distribution of this Report on August 15, 2019, the Company also submitted this Report to the U.S. Securities and Exchange Commission’s Whistleblower Program and the U.S. Department of Justice’s FIRREA Whistleblower Program. Both or either of those submissions may generate profits for the Company independent of the financial performance of GE and/or the securities, derivatives, and other financial instruments of, and/or relating to, GE.
dboreham 7y ago
Actually this is standard practice in the shorting industry and perfectly legal since the information is publicly available. It was entirely their goal to push the stock price down just as there are legions of folks trying to do the opposite (in perhaps not so immediately obvious ways).
zaroth 7y ago
If you hold the stock and make a knowingly false statement about the stock in an attempt to move the market, particularly without disclosing that you hold the shares, it may be securities fraud. The line is very difficult to draw between constitutionally protected speech and securities fraud. [1] [1] - https://scholarship.law.missouri.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1683&context=facpubs https://scholarship.law.missouri.edu/cgi/viewcontent.cgi?ref...
hyperpape 7y ago
Short answer: probably not unless they're willfully lying. I posted a column related to short-selling a while ago. https://news.ycombinator.com/item?id=18017060 https://news.ycombinator.com/item?id=18017060.
driverdan 7y ago
So long as the information is public it's not insider trading.
elthran 7y ago
To paraphrase Matt Levine - everything is securities fraud
okmokmz 7y ago
>They had insider knowledge No, as the author stated all of the information used is publicly available

eledumb 7y ago

duh, whether it's true or not when their accusations are release the initial knee jerk reaction from the sheeple will be to sell which will drive down the price. Shorting GE before making the accusations is profiteering in my book. If it turns out they were wrong they'll still be able to make money on the short, buy back in with the profits and then when the stocks rebound they cash in again. The entire stock market is a ponzi scheme for insiders.

NikolaeVarius 7y ago
> If it turns out they were wrong they'll still be able to make money on the short, buy back in with the profits and then when the stocks rebound they cash in again. Explain
- rwc 7y ago
  It's simple: GE is down, as of right now, over 11%. Knowing the sensational allegations of the report would have a short-term deleterious effect, they shorted the stock. They can turn the profit from the successful short around into buying GE at its depressed price, and profit a second time when the stock returns to normal levels after the report is found to be exaggerated. This assumes the report is, in fact, exaggerated.
  - elliekelly 7y ago
    That would be market manipulation[1] and a violation of the Exchange Act[2]. [1] https://en.wikipedia.org/wiki/Market_manipulation https://en.wikipedia.org/wiki/Market_manipulation [2] https://www.law.cornell.edu/uscode/text/15/78i https://www.law.cornell.edu/uscode/text/15/78i
jcfrei 7y ago
No, if Markopolos's allegations are correct then this is exactly how financial markets are supposed to work. They are about price discovery - the reward for this information integration is the profit that Markopolos and the Hedge Fund have made / are about to make. If these allegations prove to be baseless then they will receive a hefty fine by the SEC which I'm sure will at the very least take away any profits they've incurred.

the_watcher 7y ago

Isn't it more the reverse? They shorted GE, so now they're well positioned to reap the benefits of convincing other people to short GE, regardless of the truth of the accusations.

pbourke 7y ago

That's sort of the whole point of these things. Not like they're writing this report for free ...

bart_spoon 7y ago

Also creates an financial incentive to try and spread FUD to tank the stock. "Skin in the game" is overrated. It inclines one towards partiality rather than impartiality.