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> Market manipulation. Loosely, market manipulation happens when you artificially influence the price of a stock, resulting in a personal gain. Buying stock wit

> Market manipulation. Loosely, market manipulation happens when you artificially influence the price of a stock, resulting in a personal gain. Buying stock with the intention of causing a short squeeze can be interpreted to fit that definition. I believe that WSB is creating artificial demand to try to "screw over" certain institutional investors. I am not a lawyer; this is not a legal interpretation. Bill Ackman went on CNBC last year in near tears saying the end was coming, helping stocks continue their nose dive...all the while he was buying tons and tons of stocks which he turned into billions. How is that allowed but people on a message board sharing positions and high number of short floats isn't? There is literally, and has been for a long time, a website that tells you the short interest in a stock. It's sole purpose is to help people find short squeezes. That's why you have stats like "days to cover."

tylerhou 6y ago
> Bill Ackman went on CNBC last year in near tears saying the end was coming, helping stocks continue their nose dive.... How is that allowed? It shouldn't be allowed without proper disclosure on their actual positions. The SEC has prosecuted people in the past for making public statements while taking the other direction without proper disclosure. I believe that this should be investigated by the SEC, but it likely may not since, at the direction of the Trump administration, the SEC has instead focused their efforts on other financial crimes.
- jdavis703 6y ago
  I personally believed that stocks would continue at depressed valuations for the duration of the pandemic, yet bought during the crash because I knew there would be a recovery. I don’t think those actions are contradictory. (And of course I wound up being surprised how quickly prices recovered.)
  - partiallypro 6y ago
    You weren't a huge fund manager on TV talking down the market in real time while having your firm buy. A lot of people vested around last March, that's completely different than trying to scare people out of positions on national TV so that you can get into the position at a lower price.
- ethbr0 6y ago
  > The SEC has prosecuted people in the past for making public statements while taking the other direction without proper disclosure. There a difference between "This stock is going down. (I buy long because I know something I'm not saying)" and "This stock is going down. (I buy short because I believe what I say)" This is essentially Reddit saying "This stock is going up, so buy options to exacerbate that and to profit." No misrepresentation. If the SEC doesn't like this, they should fix the underlying market structure that makes this action possible. Effectively: what allows the traders to create leverage by abusing / forcing brokers to take specific actions. Or just give up and accept that by digitizing markets we're past the rubicon to smart trading and predatory pack algorithms being successful.
  - tylerhou 6y ago
    First, I am not arguing that WSB is engaging in fraud or misrepresentation, as is alleged with Ackman. That is entirely different from the activity I am alleging is being done on WSB (by a subset of posters). > This is essentially Reddit saying "This stock is going up, so buy options to exacerbate that and to profit." No misrepresentation. I see threads where WSB is saying "This stock is going up, and if we make it go up more, hedge funds & market makers will have to buy more stock to cover their short positions, and therefore it will go up even further [and we will make more money]." That's the manipulative part — creating artificial prices to induce even more demand.
    - ethbr0 6y ago
      I think it's the "manipulative" that's debatable here, because the manipulation is effectively being done by a second party. Is it manipulation if you're so predictable that an action by me causes you to always act a certain way? And I profit when you take that action? If hedge funds refused to cover their shorts (I'm probably using the wrong terminology) and left them open, this wouldn't be an issue, no? Or, conversely, if market makers refused to sell options on overly volatile stocks / stocks being manipulated?
      - tylerhou 6y ago
ghastmaster 6y ago
> ...all the while he was buying tons and tons of stocks which he turned into billions It's called activist investing. His fund did not buy stocks, but bought Credit Default Swaps to the tune of $27 million USD. In the event that the markets dropped, they were awarded massive gains if they exit position. They gained $1.3 billion. Prior to exiting the position which was publicly released, he went on media outlets and promoted the idea of shutting down the economy. This is what activist investors do. They actively spread rumors that will help their positions. https://assets.pershingsquareholdings.com/2020/03/26122842/Pershing-Square-Capital-Management-L.P.-Releases-Letter-to-Investors-March-25-2020.pdf https://assets.pershingsquareholdings.com/2020/03/26122842/P...
- rorykoehler 6y ago
  How is this not market manipulation?
  - zajd 6y ago
    It's called smart when you do these sorts of things with a 9 figure net wealth.
- ericmay 6y ago
  > It's called activist investing. I'd be really interested in learning more about the Olympic level mental gymnastics one has to go through to write this off as O.K. but then turn around and say that a bunch of random people on an open public forum saying to buy an over-shorted stock is market manipulation. They don't even have the purchasing power to make a difference here.
- TheRealDunkirk 6y ago
  I remember, a few years back, that Musk made news because he shut down someone asking questions in a public earnings report. The press was giving him a lot of flack about it. Then I kept reading, and found out the person who was trying to ask those questions represented a firm(s) that had large short positions on the stock, and was trying to cause the stock to dip. Musk knew what was going on, and headed it off. Seemed like he made a good call, but then the press made THAT the story instead.
staticautomatic 6y ago
What is artificial about buying a stock and encouraging others to buy it?
- kchr 6y ago
  Because the encouragement affects the outcome of your own investment instead of "happening on its own".
  - staticautomatic 6y ago
    So no one should be allowed to speak for or against buying or selling stocks they own?
tylerhou 6y ago
> There is literally, and has been for a long time, a website that tells you the short interest in a stock. It's sole purpose is to help people find short squeezes. That's why you have stats like "days to cover." Again, I am not a lawyer, I am not your lawyer, and this is not a legal interpretation or legal advice; just my personal opinion. Motivation and intent are the main factors in determining manipulation. So there are two cases: 1. A trader buys stock, seeking to profit, because they believe that a short squeeze may be incoming soon. 2. A trader buys stock, seeking to profit, because they intend to drive the stock price up, thereby causing a short squeeze. (1) is legal (in my understanding; see the disclaimers above). (2) is not. They differ in their intents. The first one is "legitimate" demand, the second is "artificial." Now, it's difficult to prove intent in court. And clearly, many people in WSB legitimately are buying the stock because of (1). But there are some who are doing (2). They have plausible deniability, though, and that's why it's unlikely that anyone in WSB will be successfully prosecuted without more concrete evidence.

tylerhou 6y ago

> Bill Ackman went on CNBC last year in near tears saying the end was coming, helping stocks continue their nose dive.... How is that allowed? It shouldn't be allowed without proper disclosure on their actual positions. The SEC has prosecuted people in the past for making public statements while taking the other direction without proper disclosure. I believe that this should be investigated by the SEC, but it likely may not since, at the direction of the Trump administration, the SEC has instead focused their efforts on other financial crimes.

jdavis703 6y ago
I personally believed that stocks would continue at depressed valuations for the duration of the pandemic, yet bought during the crash because I knew there would be a recovery. I don’t think those actions are contradictory. (And of course I wound up being surprised how quickly prices recovered.)
- partiallypro 6y ago
  You weren't a huge fund manager on TV talking down the market in real time while having your firm buy. A lot of people vested around last March, that's completely different than trying to scare people out of positions on national TV so that you can get into the position at a lower price.
ethbr0 6y ago
> The SEC has prosecuted people in the past for making public statements while taking the other direction without proper disclosure. There a difference between "This stock is going down. (I buy long because I know something I'm not saying)" and "This stock is going down. (I buy short because I believe what I say)" This is essentially Reddit saying "This stock is going up, so buy options to exacerbate that and to profit." No misrepresentation. If the SEC doesn't like this, they should fix the underlying market structure that makes this action possible. Effectively: what allows the traders to create leverage by abusing / forcing brokers to take specific actions. Or just give up and accept that by digitizing markets we're past the rubicon to smart trading and predatory pack algorithms being successful.
- tylerhou 6y ago
  First, I am not arguing that WSB is engaging in fraud or misrepresentation, as is alleged with Ackman. That is entirely different from the activity I am alleging is being done on WSB (by a subset of posters). > This is essentially Reddit saying "This stock is going up, so buy options to exacerbate that and to profit." No misrepresentation. I see threads where WSB is saying "This stock is going up, and if we make it go up more, hedge funds & market makers will have to buy more stock to cover their short positions, and therefore it will go up even further [and we will make more money]." That's the manipulative part — creating artificial prices to induce even more demand.
  - ethbr0 6y ago
    I think it's the "manipulative" that's debatable here, because the manipulation is effectively being done by a second party. Is it manipulation if you're so predictable that an action by me causes you to always act a certain way? And I profit when you take that action? If hedge funds refused to cover their shorts (I'm probably using the wrong terminology) and left them open, this wouldn't be an issue, no? Or, conversely, if market makers refused to sell options on overly volatile stocks / stocks being manipulated?
    - tylerhou 6y ago

ghastmaster 6y ago

> ...all the while he was buying tons and tons of stocks which he turned into billions It's called activist investing. His fund did not buy stocks, but bought Credit Default Swaps to the tune of $27 million USD. In the event that the markets dropped, they were awarded massive gains if they exit position. They gained $1.3 billion. Prior to exiting the position which was publicly released, he went on media outlets and promoted the idea of shutting down the economy. This is what activist investors do. They actively spread rumors that will help their positions. https://assets.pershingsquareholdings.com/2020/03/26122842/Pershing-Square-Capital-Management-L.P.-Releases-Letter-to-Investors-March-25-2020.pdf https://assets.pershingsquareholdings.com/2020/03/26122842/P...

rorykoehler 6y ago
How is this not market manipulation?
- zajd 6y ago
  It's called smart when you do these sorts of things with a 9 figure net wealth.
ericmay 6y ago
> It's called activist investing. I'd be really interested in learning more about the Olympic level mental gymnastics one has to go through to write this off as O.K. but then turn around and say that a bunch of random people on an open public forum saying to buy an over-shorted stock is market manipulation. They don't even have the purchasing power to make a difference here.
TheRealDunkirk 6y ago
I remember, a few years back, that Musk made news because he shut down someone asking questions in a public earnings report. The press was giving him a lot of flack about it. Then I kept reading, and found out the person who was trying to ask those questions represented a firm(s) that had large short positions on the stock, and was trying to cause the stock to dip. Musk knew what was going on, and headed it off. Seemed like he made a good call, but then the press made THAT the story instead.

staticautomatic 6y ago

What is artificial about buying a stock and encouraging others to buy it?

kchr 6y ago
Because the encouragement affects the outcome of your own investment instead of "happening on its own".
- staticautomatic 6y ago
  So no one should be allowed to speak for or against buying or selling stocks they own?

tylerhou 6y ago

> There is literally, and has been for a long time, a website that tells you the short interest in a stock. It's sole purpose is to help people find short squeezes. That's why you have stats like "days to cover." Again, I am not a lawyer, I am not your lawyer, and this is not a legal interpretation or legal advice; just my personal opinion. Motivation and intent are the main factors in determining manipulation. So there are two cases: 1. A trader buys stock, seeking to profit, because they believe that a short squeeze may be incoming soon. 2. A trader buys stock, seeking to profit, because they intend to drive the stock price up, thereby causing a short squeeze. (1) is legal (in my understanding; see the disclaimers above). (2) is not. They differ in their intents. The first one is "legitimate" demand, the second is "artificial." Now, it's difficult to prove intent in court. And clearly, many people in WSB legitimately are buying the stock because of (1). But there are some who are doing (2). They have plausible deniability, though, and that's why it's unlikely that anyone in WSB will be successfully prosecuted without more concrete evidence.