Bear Raid

  

Categories: Stocks, Derivatives, Trading

The word "raid" is the key here. This is an illegal practice. It's a group of investors deciding to lower the share price by short selling shares they own, while simultaneously spreading rumors the company is in trouble.

The plan is to lower the price of the shares by selling what they own, then spread enough rumors so that the other shareholders panic after they hop online and see that the company looks to be in trouble, and sell off their shares, too. Then, when the shares are nice and cheap, they buy more shares to replace the ones they sold.

Technically, buying and selling right away is fine. It's a short -term investment. But doing so in a group to manipulate the price is illegal, and the rumor mongering is fraud. But in the days of the internet, rumors are awfully hard to trace.

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