RE: Facts5 Jan 2025 13:39
TW et al possibly work with brokers and Direct Market Access means they can hit the books on the bid price and suppress the shares
When brokers want to make money from a stock falling in price, they often short it. This means they sell shares they don’t own, borrow them from someone else, and then buy them back later when the price is lower, pocketing the difference. But here’s the kicker: sometimes, they don’t even bother borrowing the shares. They just sell ones they don’t actually have. This is called naked short selling. It’s not strictly legal, but there are loopholes and ways to delay the rules around settling trades, so some brokers still pull it off.
Now, brokers also have their own stash of shares, called inventory. Instead of borrowing from someone else, they’ll use their own shares to short the stock. Sometimes, they’ll even sell the same shares multiple times within their own system to create the illusion of heavy trading. This fake activity can freak people out, making them think something is wrong with the stock, which often leads to the price dropping even more.
On top of that, you’ve got people lurking around online forums and bulletin boards spreading negativity. These folks—often connected to brokers—pretend to be everyday investors. They throw around rumors, bad news, or just a general sense of doom about the stock. It’s all about creating fear, uncertainty, and doubt—FUD for short—so that regular investors panic and sell their shares.
Another sneaky trick is forward selling placing shares. This happens when a company plans to issue new shares to raise money, often at a discounted price. Brokers know this is coming, so they start selling these shares in advance, even though they don’t technically exist yet. When the actual shares hit the market, the increased supply pushes the price even lower, helping the brokers’ shorting strategy pay off.
All of this is done in ways that often skate just inside the lines of legality—or at least make it hard for regulators to prove anything shady is going on. These tactics work together to drive down the share price, and brokers rake in profits while everyday investors are left wondering why their stock keeps tanking.
Sign In
Follow the stocks
