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| "'''Short and distort'''" is a type of ] in which Internet investors ] a ] and then spread negative rumors about the company in an attempt to drive down stock prices.<ref> - Forbes</ref><ref>{{cite web| url = http://www.wired.com/techbiz/media/news/2002/06/52785| last = Glasner| first = Joanna| title = New Market Trend: Short, Distort| work = Wired| publisher = Condé Nast Digital| archiveurl = | "'''Short and distort'''" is a type of ] in which Internet investors ] a ] and then spread negative rumors about the company in an attempt to drive down stock prices.<ref> - Forbes</ref><ref>{{cite web| url = http://www.wired.com/techbiz/media/news/2002/06/52785| last = Glasner| first = Joanna| title = New Market Trend: Short, Distort| work = Wired| publisher = Condé Nast Digital| archiveurl = | ||
| http://www.webcitation.org/5nSEkhdBd| archivedate = February 11, 2010| accessdate = February 11, 2010}}</ref> ]s and text-based ] are the primary tools for the people committing "short and distort" as they tend to hide the source of the information. |
http://www.webcitation.org/5nSEkhdBd| archivedate = February 11, 2010| accessdate = February 11, 2010}}</ref> ]s and text-based ] are the primary tools for the people committing "short and distort" as they tend to hide the source of the information.{{fact}} | ||
| It is often performed as a form of ] in which stock is sold without being borrowed and without any intent to borrow.<ref>] State ] ], cited in - Liz Moyer, ] 25 September 2006</ref><ref> - Directorship Boardroom Intelligence, 18 July 2008</ref> Once the stock price has declined, the investor uses the proceeds of the initial sale to buy a larger number of the company's shares than sold originally. Some of the newly purchased stock is used to fulfill the short-selling contract; the remaining shares are then offered for sale, which causes an additional decline in the company's share price. |
It is often performed as a form of ] in which stock is sold without being borrowed and without any intent to borrow.<ref>] State ] ], cited in - Liz Moyer, ] 25 September 2006</ref><ref> - Directorship Boardroom Intelligence, 18 July 2008</ref> Once the stock price has declined, the investor uses the proceeds of the initial sale to buy a larger number of the company's shares than sold originally. Some of the newly purchased stock is used to fulfill the short-selling contract; the remaining shares are then offered for sale, which causes an additional decline in the company's share price. | ||
| During the takeover of ] by ] in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price.<ref> - Directorship Boardroom Intelligence, 2 April 2008</ref> ] ] ] said this was more than ]s and said, "This is about ]."<ref> ''New York Times'' 30 April 2008</ref> Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with ].<ref>In a 22 July 2001 hearing of a Senate subcommittee, questions were raised about a "maze of financial transactions that . . . makes Rube Goldberg look like a slacker" to which Chase was one of several banks was a party. Rumors flowed about Chase starting the day after the hearing; on 23 July 2001, Chase's stock prices dropped to a six year low ( '']'' 12 August 2002)</ref> | During the takeover of ] by ] in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price.<ref> - Directorship Boardroom Intelligence, 2 April 2008</ref> ] ] ] said this was more than ]s and said, "This is about ]."<ref> ''New York Times'' 30 April 2008</ref> Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with ].<ref>In a 22 July 2001 hearing of a Senate subcommittee, questions were raised about a "maze of financial transactions that . . . makes Rube Goldberg look like a slacker" to which Chase was one of several banks was a party. Rumors flowed about Chase starting the day after the hearing; on 23 July 2001, Chase's stock prices dropped to a six year low ( '']'' 12 August 2002)</ref> | ||
| ==Origin== | |||
| The phrase "short and distort" was coined on August 16, 1999 on the Silicon Investor web site<ref>http://www.siliconinvestor.com/readmsg.aspx?msgid=10970340</ref> by the late Gary Swancey (January 8, 1953 - June 18, 2004)<ref>http://www.familysearch.org/Eng/Search/ssdi/individual_record.asp?recid=256902668&lds=3®ion=%2D1®ionfriendly=&juris1=&juris2=&juris3=&juris4=®ionfriendly=&juris1friendly=&juris2friendly=&juris3friendly=&juris4friendly=</ref> aka "Ga Bard", a former stock promoter from Stockbridge, GA.<ref>http://www.bizapedia.com/ga/SWANCEY-SERVICES-INC.html</ref> It was directed at user "Jeffrey S. Mitchell" who Swancey had assumed, incorrectly, was a market maker shorting one of his holdings, Orex Gold (ORXX), causing it to severely decline in price.<ref>http://www.siliconinvestor.com/readmsg.aspx?msgid=24806539</ref> A subsequent federal investigation determined that the real cause of the decline was the actions of a disbarred former attorney and recidivist stock scammer named John W. Surgent of Franklin Lakes, Florida.<ref>http://www.siliconinvestor.com/readmsg.aspx?msgid=22447119</ref> | |||
| ==See also== | ==See also== | ||
Revision as of 01:33, 8 February 2012
"Short and distort" is a type of securities fraud in which Internet investors short sell a stock and then spread negative rumors about the company in an attempt to drive down stock prices. Cell phones and text-based messaging are the primary tools for the people committing "short and distort" as they tend to hide the source of the information.
It is often performed as a form of naked short selling in which stock is sold without being borrowed and without any intent to borrow. Once the stock price has declined, the investor uses the proceeds of the initial sale to buy a larger number of the company's shares than sold originally. Some of the newly purchased stock is used to fulfill the short-selling contract; the remaining shares are then offered for sale, which causes an additional decline in the company's share price.
During the takeover of The Bear Stearns Companies by J.P. Morgan Chase in March 2008, reports swirled that short sellers were spreading rumors to drive down Bear Stearns' share price. United States Senator Christopher Dodd said this was more than rumors and said, "This is about collusion." Chase was victimized by a similar "short and distort" scheme six years earlier when rumors arose about its purported relationship with Enron.
See also
References
- Investopedia entry of "short and distort" - Forbes
- Glasner, Joanna. "New Market Trend: Short, Distort". Wired. Condé Nast Digital. Archived from the original on February 11, 2010. Retrieved February 11, 2010.
{{cite web}}: Check date values in:|accessdate=and|archivedate=(help) - Connecticut State Attorney General Richard Blumenthal, cited in Wall Street Disses Regs - Liz Moyer, Forbes.com 25 September 2006
- ‘Market Cop’ Cox Urges Restraint - Directorship Boardroom Intelligence, 18 July 2008
- ‘Short and Distort’ Conduct Scrutinized - Directorship Boardroom Intelligence, 2 April 2008
- "A New Wave of Vilifying Short Sellers" New York Times 30 April 2008
- In a 22 July 2001 hearing of a Senate subcommittee, questions were raised about a "maze of financial transactions that . . . makes Rube Goldberg look like a slacker" to which Chase was one of several banks was a party. Rumors flowed about Chase starting the day after the hearing; on 23 July 2001, Chase's stock prices dropped to a six year low (James Surowiecki, "Short and Distort" The New Yorker 12 August 2002)