Wednesday, August 29, 2007

Push a Stock Price Down So You Can Profit on the Upswing?

I've been reading a fair amount lately about companies that invest in another company with a depressed stock price and then try to make changes in the company to bring the stock price up. Nothing wrong with this.

However, I've noticed that sometimes these investor companies are invested for quite a long while before they make an aggressive move on the management. Sometimes, it seems, that a significant part of the downturn has occurred after the investor company got in. What if the investor company surreptitiously did things on purpose to cause the stock price to go down? Then they could greatly increase their holdings, having excellent insight into the "problem" (being as they caused it themselves). Then they could solve the problem and benefit from the rebound in the stock price.

Illegal, but people might be getting away with it.

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