5 ms·

https://www.bloomberg.com/opinion/articles/2020-03-26/nobody-wants-a-margin-call-right-now https://www.bloomberg.com/opinion/articles/2020-03-26/nobody... Zoom

by kgwgk 7y ago

https://www.bloomberg.com/opinion/articles/2020-03-26/nobody-wants-a-margin-call-right-now https://www.bloomberg.com/opinion/articles/2020-03-26/nobody... Zoom/Zoom People keep buying the shares of Zoom Technologies Inc., a company that doesn’t seem to do much, but which has the Nasdaq ticker “ZOOM,” when they mean to buy shares of Zoom Video Communications Inc., a company (ticker “ZM”) that does a brisk business in the newly booming corporate-and-preschool-videoconferencing sector. I have written about this phenomenon at least twice, but people keep emailing me about it every time ZOOM goes up. I assume they kept emailing the SEC too, because here’s an order suspending trading in ZOOM: "It appears to the Securities and Exchange Commission that the public interest and the protection of investors require a suspension of trading in the securities of Zoom Technologies, Inc. (“ZOOM”) (CIK# 0000822708) because of concerns about the adequacy and accuracy of publicly available information concerning ZOOM, including its financial condition and its operations, if any, in light of the absence of any public disclosure by the company since 2015; and concerns about investors confusing this issuer with a similarly-named NASDAQ-listed issuer, providing communications services, which has seen a rise in share price during the ongoing COVID-19 pandemic." By the way I hope you didn’t get too clever about this. For instance, if you noticed that everyone was buying the wrong Zoom and decided to profit from their stupidity by selling ZOOM short, then (1) you have done poorly (ZOOM is up almost 900% year to date) and (2) now you might not be able to close out your short.

lordnacho 7y ago
If the listing is really small it will be hard to borrow, and you'll have a hard time shorting much of it. Normally people who do a lot of shorting will have checks in place anyway, I used to.
raverbashing 7y ago
> if you noticed that everyone was buying the wrong Zoom and decided to profit from their stupidity by selling ZOOM short, then (1) you have done poorly When short-selling, I believe people either know very well what they're doing (and they're using it as a "building block" into a bigger transaction) or they really don't have a clue and are just acting on a "hunch". I believe 90% of people are in the latter group.
- pas 7y ago
  Could you give an example of how such a bigger transaction would look like?
  - raverbashing 7y ago
    Some examples here https://www.investopedia.com/trading/options-strategies/ https://www.investopedia.com/trading/options-strategies/ (the basic one without safety nets is the "naked call")
DonHopkins 7y ago
Write Zoom, Z-double-O-M, Box 3-5-0, Boston, Mass 0-2-1-3-4: send it to Zoom! https://www.youtube.com/watch?v=0Q9v3tZ5IC4 https://www.youtube.com/watch?v=0Q9v3tZ5IC4
dheera 7y ago
> By the way I hope you didn’t get too clever about this. For instance, if you noticed that everyone was buying the wrong Zoom and decided to profit from their stupidity by selling ZOOM short, then (1) you have done poorly (ZOOM is up almost 900% year to date) and (2) now you might not be able to close out your short. I don't really see why the SEC needs to meddle with issues like this. Why is it wrong to be clever and profit from others' stupidity and laziness? It seems like one should be rewarded for being clever and understanding humans and human oversights that well, and that is part of the spirit of a free market economy.
- matsemann 7y ago
  > Why is it wrong to be clever and profit from others' stupidity and laziness? Because it's parasitic and provides no value to society?
  - dheera 7y ago
    The entire stock market itself is parasitic to society, for that matter, so I don't really see any difference. As far as I see, the entire point of it is that there are these larger parasites (hedge funds, high-frequency traders, billionaires with inside info), and the point for small individuals is to figure out how to game it and pocket some of the money with out-of-the-box thinking. If we wanted stock markets to not be parasitic, we'd establish rules around certain things. Like when a company does something wrong, its price shouldn't be shooting up just because it profited from that wrongdoing. When a company does the right thing, its price shouldn't be plundering down because it lost "earnings" or some other stupid quarterly metric. When a company needs resources to fix a mistake, we shouldn't be taking monetary resources away from them that would be put toward fixing that mistake. Doing the right thing (ethically, environmentally, etc.) should come foremost, and stock prices should be not be determined entirely by shareholders who couldn't care less about ethics. That is parasitic behavior.
    - pas 7y ago
      Informed investors setting the price is an important signal, it helps with allocation of resources. (See all the benchmark indices based on various exchanges, markets, sectors, industries, regions, etc.) Dumb mistakes don't help with this. And finally, we can discuss about how much value that signal has, and how much it helps resource allocation - because I have no data/studies on it, but the current status quo seems to pretty much support that it indeed does provide some added value.

by kgwgk 7y ago

lordnacho 7y ago

If the listing is really small it will be hard to borrow, and you'll have a hard time shorting much of it. Normally people who do a lot of shorting will have checks in place anyway, I used to.

raverbashing 7y ago

> if you noticed that everyone was buying the wrong Zoom and decided to profit from their stupidity by selling ZOOM short, then (1) you have done poorly When short-selling, I believe people either know very well what they're doing (and they're using it as a "building block" into a bigger transaction) or they really don't have a clue and are just acting on a "hunch". I believe 90% of people are in the latter group.

pas 7y ago
Could you give an example of how such a bigger transaction would look like?
- raverbashing 7y ago
  Some examples here https://www.investopedia.com/trading/options-strategies/ https://www.investopedia.com/trading/options-strategies/ (the basic one without safety nets is the "naked call")

DonHopkins 7y ago

Write Zoom, Z-double-O-M, Box 3-5-0, Boston, Mass 0-2-1-3-4: send it to Zoom! https://www.youtube.com/watch?v=0Q9v3tZ5IC4 https://www.youtube.com/watch?v=0Q9v3tZ5IC4

dheera 7y ago

> By the way I hope you didn’t get too clever about this. For instance, if you noticed that everyone was buying the wrong Zoom and decided to profit from their stupidity by selling ZOOM short, then (1) you have done poorly (ZOOM is up almost 900% year to date) and (2) now you might not be able to close out your short. I don't really see why the SEC needs to meddle with issues like this. Why is it wrong to be clever and profit from others' stupidity and laziness? It seems like one should be rewarded for being clever and understanding humans and human oversights that well, and that is part of the spirit of a free market economy.

matsemann 7y ago
> Why is it wrong to be clever and profit from others' stupidity and laziness? Because it's parasitic and provides no value to society?
- dheera 7y ago
  The entire stock market itself is parasitic to society, for that matter, so I don't really see any difference. As far as I see, the entire point of it is that there are these larger parasites (hedge funds, high-frequency traders, billionaires with inside info), and the point for small individuals is to figure out how to game it and pocket some of the money with out-of-the-box thinking. If we wanted stock markets to not be parasitic, we'd establish rules around certain things. Like when a company does something wrong, its price shouldn't be shooting up just because it profited from that wrongdoing. When a company does the right thing, its price shouldn't be plundering down because it lost "earnings" or some other stupid quarterly metric. When a company needs resources to fix a mistake, we shouldn't be taking monetary resources away from them that would be put toward fixing that mistake. Doing the right thing (ethically, environmentally, etc.) should come foremost, and stock prices should be not be determined entirely by shareholders who couldn't care less about ethics. That is parasitic behavior.
  - pas 7y ago
    Informed investors setting the price is an important signal, it helps with allocation of resources. (See all the benchmark indices based on various exchanges, markets, sectors, industries, regions, etc.) Dumb mistakes don't help with this. And finally, we can discuss about how much value that signal has, and how much it helps resource allocation - because I have no data/studies on it, but the current status quo seems to pretty much support that it indeed does provide some added value.