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Is a "short squeeze" by definition market manipulation? In an illegal way? I don't think it is generally considered such? Unless it involves putting out fraudu

Is a "short squeeze" by definition market manipulation? In an illegal way? I don't think it is generally considered such? Unless it involves putting out fraudulent/false information. Porsche execs were investigated/tried in Germany for lying about their financial situation in order to trigger a short squeeze on Volkswagon (i believe none were convicted) -- the potential crime was the fraudulently misleading communications, not the short squeeze itself. Because this seems just like any other short squeeze, the difference is mainly that it was planned in public instead of secretly in private. And that makes it less likely to cross the line into some kind of illegality, not more, right? "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. It's what tons of big traders do all the time, right? It's illegal when it involves fraud, lying, secret collusion, insider trading, dereliction of fiduciary responsibility, etc. Any kind of 'short squeeze' could certainly be considered "market manipulation" in the plain English meaning of those words, but that doesn't mean it's illegal. This investopedia article [1] on 'short squeeze' says "Contrarian investors may buy stocks with heavy short interest in order to exploit the potential for a short squeeze" -- it does not suggest there is anything illegal about that. Is that not exactly what wsb did, no more no less? they collectively decided to buy shares to exploit the potential for a short squeeze. Investors do this all the time, the unusual thing here is that it was planned completely in public, and that it involved such a large number of small retail traders (in addition to a few pretty big traders... and quite likely other non-wsb-affiliated big traders we don't even know about who saw what wsb was doing and decided to go along for the ride, or who saw the short squeeze potential themselves independently). Most traders don't put their "market manipulation" in public because a) they don't think it could work if they did, and b) they know they cross grey areas of legality all the time, so don't want their business to be out in the open like that. But in this case... what law was violated? [1] https://www.investopedia.com/terms/s/shortsqueeze.asp https://www.investopedia.com/terms/s/shortsqueeze.asp

elliekelly 6y ago
You’re absolutely right. A short squeeze in and of itself is absolutely not market manipulation. Sometimes it just happens. But creating a short squeeze can be market manipulation. > "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. I’m not quite sure what you mean by this. Market manipulation is a concerted (and sometimes coordinated) effort to artificially influence the supply or demand of a security. Market manipulation often relies on false information but false information is not at all a required element of market manipulation. Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market. I suppose its theoretically possible for everyone in the market to coordinate against one or a few players. To my knowledge there’s never been a situation with such a large coordinated effort. That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily. I definitely think the SEC could make the case they've violated the Exchange Act and potentially the '33 Act depending on what % of $GME the group controlled.
- mlthoughts2018 6y ago
  I’m sorry but you have written several blowhard comments along these lines and it’s just wrong. There is no such thing as “creating” a short squeeze. There is just a buying strategy based on hard work of appraising the fundamentals and speculating correctly, and you are perfectly free to tell others you plan to do that and coordinate with them. Calling anything the retail / WSB investor crowd did in this scenario “manipulation” is ridiculous and insulting. “Coordinating” by explaining a strategy and inviting others to participate is not “manipulation.”
  - elliekelly 6y ago
    Well I'm a securities lawyers soooo I kind of know a thing or two about this stuff. I stand by everything I've said. If that makes a stranger on the internet think I'm a "blowhard", so be it. Apologies if reality hurts your feelings. Nothing I've said is wrong. Many things you've said are, though. Oh, and you might want to google Phil Falcone.
    - mlthoughts2018 6y ago
      If true, I’m quite shocked just based on the bald-faced, zeroth order flagrant incorrectness of things you wrote in other comments about it. I worked as a fund manager at an asset management firm for a few years, often sitting daily with our general counsel on many issues. Nothing you have said about this, including the totally off the wall comparison with Phil Falcone, causes me to believe your take is trustworthy here. I’m not a lawyer, but just because you allegedly are one doesn’t mean I’m going to take your opinion on this at face value.
      - elliekelly 6y ago
        Prepare to be quite shocked, bud. I'm still waiting for you to point out what exactly I've said that's wrong. Since your comments are full of angry rhetoric and lacking in substance it seems that you strongly dislike what I've said which is actually very different from what I've said being "flagrantly incorrect". Classic mixup. > often sitting daily with our general counsel on many issues I think you think this somehow bolsters your (again, completely emotional) argument? On the contrary, this is a pretty good indicator you don't understand federal securities laws. And I must say, I concur with your former GC's assessment.
fma 6y ago
It's illegal if you're not rich... In 2013 Bill Ackman had a huge short position on Herbalife. Carl Icahn in front of millions of viewers on CNBC promoted a short squeeze. "During the epic verbal battle between Icahn and Ackman that was televised on CNBC in January, Icahn predicted that Ackman’s Herbalife investment could produce the “mother of all short squeezes.” Shortly after that incident, it became clear that Icahn had taken a big position in Herbalife’s stock. He has since expanded that position, bought 16.5% of the outstanding shares and gotten two representatives on Herbalife’s board. " https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-icahn-is-squeezing-bill-ackman-to-death-with-herbalife-trade/?sh=76b7267b15e5 https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-ica...
- caseysoftware 6y ago
  ^ This. If the Biden SEC comes after Redditors while the Obama SEC let this and many other things pass, whatever chaos they imagine won't begin to describe it. It's one of the few things AOC, Warren, Cruz, and many others (claim to) agree on.

elliekelly 6y ago

You’re absolutely right. A short squeeze in and of itself is absolutely not market manipulation. Sometimes it just happens. But creating a short squeeze can be market manipulation. > "Market manipulation" itself is not necessarily illegal, if you just mean doing things that will effect the market in a way to bring profit to yourself. I’m not quite sure what you mean by this. Market manipulation is a concerted (and sometimes coordinated) effort to artificially influence the supply or demand of a security. Market manipulation often relies on false information but false information is not at all a required element of market manipulation. Where things get interesting (and fuzzy) here that I’m not quite sure where the line is between a group working together to influence the market and just... the market. I suppose its theoretically possible for everyone in the market to coordinate against one or a few players. To my knowledge there’s never been a situation with such a large coordinated effort. That said, there are definitely a handful of individuals on WSB who got the ball rolling and have profited heavily. I definitely think the SEC could make the case they've violated the Exchange Act and potentially the '33 Act depending on what % of $GME the group controlled.

mlthoughts2018 6y ago
I’m sorry but you have written several blowhard comments along these lines and it’s just wrong. There is no such thing as “creating” a short squeeze. There is just a buying strategy based on hard work of appraising the fundamentals and speculating correctly, and you are perfectly free to tell others you plan to do that and coordinate with them. Calling anything the retail / WSB investor crowd did in this scenario “manipulation” is ridiculous and insulting. “Coordinating” by explaining a strategy and inviting others to participate is not “manipulation.”
- elliekelly 6y ago
  Well I'm a securities lawyers soooo I kind of know a thing or two about this stuff. I stand by everything I've said. If that makes a stranger on the internet think I'm a "blowhard", so be it. Apologies if reality hurts your feelings. Nothing I've said is wrong. Many things you've said are, though. Oh, and you might want to google Phil Falcone.
  - mlthoughts2018 6y ago
    If true, I’m quite shocked just based on the bald-faced, zeroth order flagrant incorrectness of things you wrote in other comments about it. I worked as a fund manager at an asset management firm for a few years, often sitting daily with our general counsel on many issues. Nothing you have said about this, including the totally off the wall comparison with Phil Falcone, causes me to believe your take is trustworthy here. I’m not a lawyer, but just because you allegedly are one doesn’t mean I’m going to take your opinion on this at face value.
    - elliekelly 6y ago
      Prepare to be quite shocked, bud. I'm still waiting for you to point out what exactly I've said that's wrong. Since your comments are full of angry rhetoric and lacking in substance it seems that you strongly dislike what I've said which is actually very different from what I've said being "flagrantly incorrect". Classic mixup. > often sitting daily with our general counsel on many issues I think you think this somehow bolsters your (again, completely emotional) argument? On the contrary, this is a pretty good indicator you don't understand federal securities laws. And I must say, I concur with your former GC's assessment.

fma 6y ago

It's illegal if you're not rich... In 2013 Bill Ackman had a huge short position on Herbalife. Carl Icahn in front of millions of viewers on CNBC promoted a short squeeze. "During the epic verbal battle between Icahn and Ackman that was televised on CNBC in January, Icahn predicted that Ackman’s Herbalife investment could produce the “mother of all short squeezes.” Shortly after that incident, it became clear that Icahn had taken a big position in Herbalife’s stock. He has since expanded that position, bought 16.5% of the outstanding shares and gotten two representatives on Herbalife’s board. " https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-icahn-is-squeezing-bill-ackman-to-death-with-herbalife-trade/?sh=76b7267b15e5 https://www.forbes.com/sites/nathanvardi/2013/07/22/carl-ica...

caseysoftware 6y ago
^ This. If the Biden SEC comes after Redditors while the Obama SEC let this and many other things pass, whatever chaos they imagine won't begin to describe it. It's one of the few things AOC, Warren, Cruz, and many others (claim to) agree on.