Beware of the Basher
The Investing Guys (Investopedia.com)
Whether you are just starting to invest online or a seasoned veteran, chances are you've seen the message boards and chat rooms that focus on stocks. Many of these boards make rag mags look tame. These sites churn out rumor after rumor 24 hours a day, with some of the more popular boards getting upwards of 10,000 posts daily.
The Internet has changed the financial industry to a greater extent than nearly any other sector. In the pre-Internet era, there was no way for individual investors from every corner of the globe to meet and talk about the prospects and threats of a company. This free-flow of information has changed the very way we invest. This does not come without a price, the anonymity of the Internet has also allowed for creative, yet unscrupulous people to artificially deviate and control the price of a stock. We refer to these people as bashers.
The Paid Basher.
This profession may seem fairly simple, but there is a science behind it. A basher's intentions usually go further than just trying to push the price of a stock down for their own good. Supposedly reputable companies and investment firms may use a basher for things such as takeovers. You see, if one company wants to buy another, stock price is king. For a multi-million dollar company a $1 change in the stock price is a difference of millions of dollars. A basher who successfully pushes the price of a stock down can receive a very lucrative compensation.
There are three major types of bashers: advanced, intermediate and beginner. An advanced basher would spread false or misleading information about the company. They would deal in facts, countering every long post with articles, news reports and opinion surveys that gave a negative impression about the company. An intermediate basher tries to weasel their way into the confidence of longs and create doubt using rumor or innuendo. Finally, a beginner basher would attempt to create confusion in the room by distracting other posters with satire, name calling and pointless arguments. Their goal is to make sure no serious discussion of the stock takes place.
Bashers go about their job very professionally. First they develop a character to build both awareness and trust from others on the chat board. Bashers are careful to never to use profanity or vulgarity because that would cause people to ignore them. Quite often they will answer posts in a way that ridiculed the questioner for asking such a "stupid" question. The idea is to get a reaction from other posters. The more reaction, the more the room would be disrupted. To throw yet another monkey wrench into this mix, bashers often send in another person to side with the longs of a stock. The idea behind this is to again distract people from a stock and spread rumor and confusion throughout the room.
The truth is that this is happening everyday. There are people out there who make a good living by bashing. Keep this in mind, participating in a chat forum is both enjoying and sometimes insightful, but take each message with a grain of salt.
Cheers,
The Investing Guys
Webmaster@Investopedia.com
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