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Non-Tech : S. I.'s Most Wanted Bad Guys
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To: AuldDruid who wrote (27)7/8/1998 11:15:00 PM
From: K A Anderson  Read Replies (1) of 157
 
I forget where I read it, but I was reading an article about how these Market Makers are exploiting both the investors and these business's, on the OTC market.

Basically the MM's and in some cases less than reputable investment bankers go out of their way to "recruit" small companies to "go public" on the OTC market. Most of these companies really have no business being public, simply because they have not the operations sales, management experience or expertise in their field.

The company will then hand over a set amount of stock on a "consignment" or a best effort sale, (the underwriter gets what ever price they can for the stock). Then "sales" the stock to the MMs under the same terms.

What you have is a bunch of free stock on consignement, the MMs may initially buy a few shares for their inventory, and then start shorting the stock on consignment, while offering to sell to the public in the "best effort" to get the best price on behalf of the company that gave them the stock to sell. Basically in the long run the MMs are betting this new business and its stock will flounder if not just out right failure.

These Investment Bankers and MMs know they are dealing with an inferior or weak company, and present these companies as something better than what they actually are, then continue shorting the stock long after they have sold it.

Just another legal way to rip off investors.

I hardly ever buy a NASDAQ or OTC stock any more, simply because of the MM manipulation. I mainly search for high risk stocks on the AMEX.

KAA
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