The issue of whether chatsites such as SI and its members have influence to manipulate stocks is an interesting one. Of course it is most definately not a simple issue.
I believe that determining the ability to manipulate certain types of securities can be proven. The depth of which many might not understand. Certain forums are begun to tout a stock one way or the other. Considering the availability of this "data" is not only important to understand and consider from an individual investors perspective, but also from the institutional perspective. If I work for ABC investment bankers, then I am in a position to aide my companies bottom line by keying in on such forums as SI and finding a stock that is being heatedly discussed. Interest is already there, meaning that I do not have to drum it up myself. Much easier to move anything we might have in "stock", or feed on the interest by buying up shares only to dump later.
Another aspect that may not be considered by most investors, is that IPO's have become a systamatic scale as to what will fly and what will die in the markets. Any company that wants to make it successfully knows beforehand the importance of its IPO. What it lists for, and how many shares combined with where it is being listed, all play an important role in how this company is conceived by the masses. If YHOO had decided to do its IPO on the OTC:BB at the same introduction price level that they had when listing on the NASDAQ, they would have not been able to sell all of their stock. Why? Well IMO I beleive the appropriate response to that question is who, meaning who are the buyers in this market?
The reality is that those who trade in BB stocks just don't have the money to trade value(real or implied) stocks on the major exchanges. No, this does not mean everyone, but the majority of investors and traders are those with a couple of hundred bucks in their portfolios.
This being the case, the stage is set for "boilerrooms" to feed off of several factors that permeate the senses of these investors. Namely greed and status. When John Q. Investor lines up his hard earned five hundred dollars to buy stock, the thought of owning 1000 shares of a 4 bit stock feels more glamourous then owning 3 shares of MSFT. Feeling richer, he has been bitten by the "greed" factor. Instead of understanding that his 3 shares of MSFT could easily make him a 2 to 3 % return every two weeks if he is inclined to trade both ways, he dreams about his penny stock becoming the next MSFT and being worth 100 dollars. His desire for this to happen makes him susceptible to positive statements regarding the company. He jumps into a chat like SI and begins to in his excitement talk up "his" company. Others follow suit who have jumped in with him. This is as someone put it "fodder" for dishonest people who have both time and money to orchestrate a return on their investment.
Most people who play the BB pennies are looking for that pot of gold at the end of the rainbow. This may offend many who trade only BB pennies, but I stand by my statement. I too have gotten caught up in that cycle. I have the BreX wall paper to prove it.
What does all this mean? Yes, we can manipulate small BB stocks on the SI thread, but it is not the effort of one or two, it is the chain reaction that is set off by one or two that reaches out and catches hundreds more which gets the attention of institutions and boiler room goons who use their financial muscle to feed the "fish" so to speak.
This process has gone on almost since the initiation of the original exchange in 1792. It won't go away as long as there are people who want to get rich quick without the sweat and tears.
As far as the issue of liability for ones comments in forums such as this, it is a sticky situation. Obviously one cannot knowingly dissemminate false information to enhance ones own portfolio, but where is the line drawn. It is much to altruistic to beleive that anyone who lies about a company, and benefits from that lie is guilty of stock manipulation and therefore to be punished. Where is the line drawn between a simple dishonesty by one or two individuals who are trying to hype their small holdings, and orchestration by a group of individuals who have alot more money set in motion. Where does the truth become a lie and the lie become the truth in such situations. If one gets on a thread and begins to lie about the great quarterly report that is just around the corner that will blow the lid off of ABC companies stock price, how do we as individuals interpret that? I may think the poster is talking about a 200% increase, while my neighbor may think that finally they are turning a profit 2-3 cents a share. Stock price begins to go up, and report comes out. Company show a loss of 5 cents per share vs 8 cents a yr previous. Obviously hype, but is it a lie according to judicial statutes. Company says that they have some major players coming in to help finance some new project.The truth yes. Stock price goes up, but when the reg s becomes public knowledge, stock takes a nosedive. With the SEC having difficulty flexing any kind of muscle at all, setting courtroom precidences is a long time in coming. |
