5 ms·

Pump and dump isn’t legal.

by dd36 6y ago

nip180 6y ago
Squeezing a short is different then a pump and dump.
- jermaustin1 6y ago
  When it succeeds, and the originators of the squeeze don't sell beforehand.
  - vetinari 6y ago
    As it was said in previous days: they (the originators of the squeeze) can remain irrational longer, than the other side (hedge fund managers) can remain solvent.
    - jermaustin1 6y ago
      True, but if they sell a massive position and the stock tanks, and a bunch of little guys are left to hold the bag, I could see the SEC definitely investigating it as a pump and dump.
      - monadic3 6y ago
        Might as well try to hold water in a sieve. What are they gonna do, charge tens of thousands of people?
      - vetinari 6y ago
        If the bunch of the little guys invested each just few hundred, it is not that a big loss. So if they end up holding the bag, it will be distributed among big crowd, where each member would be missing just a little. Of course, if someone went above that and invested an amount, where losing it would hurt, that's different.
xutopia 6y ago
Except it isn't a pump and dump. It is a short squeeze. Hedge fund managers are betting more stocks than the company issued and people are taking advantage of that opportunity. The closest thing to criminal activity we see here is people betting more than a company's stock. When hedge fund managers see this and buy all the stock to squeeze the shorters it's normal. When it's people like you and me they say it is illegal.
- batmenace 6y ago
  It is a pump in the sense that none of the fundamentals of the company have changed between December and now, the main event has been people buying stock with the express purpose of enabling a short squeeze. Legally, there could be an argument for it being market manipulation.
  - llampx 6y ago
    So nobody should ever buy a stock unless something material, as defined by you, has changed? Not because they think it'll go up in the future?
    - koheripbal 6y ago
      Sure they can. But coordinating multiple people to do that is a classic pump and dump, and is explicitly illegal.
      - factsaresacred 6y ago
        Where's the coordination? People in subreddits are talking about what they are doing and others are choosing to do the same thing. No different from somebody on CNBC providing stock picks.
        llampx 6y ago
        Exactly. CNBC is the biggest market manipulator with a huge mouthpiece. Anytime Cramer mentions a stock in favorable terms it goes up, at least short term. Meanwhile we know that he is friends with hedge funds and at least part of time is probably taking positions before going on TV. We give that a free pass but suddenly a loosely-organized internet forum is a problem.

Pump and dump isn’t legal.

by dd36 6y ago

Pump and dump isn’t legal.

nip180 6y ago

Squeezing a short is different then a pump and dump.

jermaustin1 6y ago
When it succeeds, and the originators of the squeeze don't sell beforehand.
- vetinari 6y ago
  As it was said in previous days: they (the originators of the squeeze) can remain irrational longer, than the other side (hedge fund managers) can remain solvent.
  - jermaustin1 6y ago
    True, but if they sell a massive position and the stock tanks, and a bunch of little guys are left to hold the bag, I could see the SEC definitely investigating it as a pump and dump.
    - monadic3 6y ago
      Might as well try to hold water in a sieve. What are they gonna do, charge tens of thousands of people?
    - vetinari 6y ago
      If the bunch of the little guys invested each just few hundred, it is not that a big loss. So if they end up holding the bag, it will be distributed among big crowd, where each member would be missing just a little. Of course, if someone went above that and invested an amount, where losing it would hurt, that's different.

xutopia 6y ago

Except it isn't a pump and dump. It is a short squeeze. Hedge fund managers are betting more stocks than the company issued and people are taking advantage of that opportunity. The closest thing to criminal activity we see here is people betting more than a company's stock. When hedge fund managers see this and buy all the stock to squeeze the shorters it's normal. When it's people like you and me they say it is illegal.

batmenace 6y ago
It is a pump in the sense that none of the fundamentals of the company have changed between December and now, the main event has been people buying stock with the express purpose of enabling a short squeeze. Legally, there could be an argument for it being market manipulation.
- llampx 6y ago
  So nobody should ever buy a stock unless something material, as defined by you, has changed? Not because they think it'll go up in the future?
  - koheripbal 6y ago
    Sure they can. But coordinating multiple people to do that is a classic pump and dump, and is explicitly illegal.
    - factsaresacred 6y ago
      Where's the coordination? People in subreddits are talking about what they are doing and others are choosing to do the same thing. No different from somebody on CNBC providing stock picks.
      - llampx 6y ago
        Exactly. CNBC is the biggest market manipulator with a huge mouthpiece. Anytime Cramer mentions a stock in favorable terms it goes up, at least short term. Meanwhile we know that he is friends with hedge funds and at least part of time is probably taking positions before going on TV. We give that a free pass but suddenly a loosely-organized internet forum is a problem.