| | | For those who've read my posts about short manipulation and who insist that it can't be happening because of the bimonthly reports, I was banned for writing about this on another thread. I do believe I am correct that this is happening to REFR. I don't think the tactics are going to work any more. The bashing and blaming Joe for the low price. Getting hostile on conference calls. Spreading false information on message boards.
Here are the facts about a hedge fund manipulating the stock price. We all know the hedge fund and hedge fund manager. I believe it has been doing this for years as the same names I used to interact with in 1999 an on, are still bashing and promoting false information hoping to play on longs' frustration.
I have no doubt my troll will go nuts, but I'm posting it because I think it's important.
Can hedge funds manipulate stock price by shorting? Can they disguise this because the amount shorted is valued less than 10 million and lower than 2%?
Yes,
hedge funds can potentially manipulate stock prices through short selling, and they may use a variety of legal and illegal strategies to disguise their positions, especially when they are below the new SEC monthly reporting thresholds of $10 million or 2.5% of outstanding shares. While short selling is a legitimate trading strategy, the practice can be abused.
Methods of potential stock manipulation
- Abusive "naked" short selling: The SEC has brought charges against hedge funds for engaging in abusive naked short selling, where they place short sales without first borrowing or locating the shares. This can create artificial selling pressure.
- Spreading false rumors: Short sellers, including hedge funds, can intentionally spread negative or misleading information about a company to drive down its stock price. The SEC can and does bring enforcement actions against such market manipulation.
- Aggressive coordinated shorting: While activist short sellers can expose fraud, critics argue they can also coordinate "bear raids" to drive down a stock price for a profit.
- Triggering margin calls: Large, coordinated shorting campaigns can accelerate a stock's decline, potentially causing margin calls for other investors and fueling a further sell-off.
Disguising positions below reporting thresholds
- Splitting up positions: A large hedge fund could potentially divide its short positions among multiple managed entities to keep each individual position below the reporting thresholds.
- Using options and derivatives: Hedge funds can use derivatives like put options to achieve a similar economic outcome to a short position without having to report it on Form SHO. For example, they could purchase deep-in-the-money put options to simulate a short position.
- Swapping positions with other funds: Some suggest hedge funds could engage in arrangements with other funds to temporarily transfer positions and obscure their activity.
Regulatory efforts and challenges
- New Form SHO reporting: The SEC's new Rule 13f-2 and Form SHO, with compliance starting in 2026, are designed to increase transparency by requiring monthly reporting of significant short positions. However, the reporting is based on monthly averages and aggregates, potentially limiting its effectiveness for catching short-term manipulation.
- Industry pushback: Hedge fund groups have legally challenged the new disclosure rules, with a federal appeals court ordering the SEC to re-evaluate the economic impact. This suggests ongoing efforts within the industry to resist new reporting requirements.
- Limitations of regulation: As some market observers have noted, there are many legal ways for hedge funds to take a short economic position without triggering a short-interest report, suggesting that reliance on reporting alone may not fully address manipulation concerns.
|
|
