How Underwriters and Short Sellers Manipulate Share Prices Ahead of Stock Offerings









This report is going to show you the techniques used by short sellers and underwriters to manipulate the price of public companies ahead of stock offerings. You will also learn of an industry trick known as “Gun and Run”. As of yet, this is the only report of its kind. 




Over the lifespan of this Trump bull run, there have been few that have moved with such a vigorous frenzy as HMNY back in 2017.  For awhile, you could say that it grabbed the heart of the nation, and every wannabe investor was just dying to get a piece of the action. The former executive of Netflix was involved!  Moviepass!  Brilliant!  It was going to revolutionize the theater industry just like Netflix did to television! 

As many of us know, hope and fear can be a dangerous mix; something that will drive even the strongest of spirits to do things that they wouldn’t even in their wildest dreams consider themselves capable of.  Doctors, lawyers, respected businessmen, clergymen even, completely forget themselves and  throw away every penny they have just so they don’t miss something for which they have convinced themselves is the next great world innovation. If you try to talk sense into these people, they will turn around, angry and aggressive, and vehemently defend their decision.

 

Maybe it is hard to blame people for being mesmerized by this chart. The buying was so strong, and for those that don’t know, or are too busy with their daily lives to follow the complexities of the stock market — let alone read the complicated language in SEC filings — this price action would look like magic.

 

Then a guy like this comes along. Nice suit, good looking, smiles, uses bullet points in his report — he must really know what he is talking about!

 

https://archive.is/hF0w9/

 

Now you can’t be swayed! Even if the price were to go to zero, there would still be a small shadow of hope deep within the cavern of your soul.   You would still believe, part of you would still be grasping, yearning like it was some long lost love that was suddenly taken from you without warning!

 


So what happened!?  The share price went from a high of $38 to being a penny stock in less then a year!

It all started on November. 6th of 2017 when they received $100 000 000 from the sale of convertible notes. For anybody who doesn’t know what those are, that’s okay, they are very simple to understand.  Most of the time when a lender loans a company money, the only way the borrower can pay them back is with cash or assets, but with a convertible note they have the option of being paid back with shares in the company rather than just with money.

At first, the agreement was that HMNY would not issue shares as payment for the loan at a price lower than $12.00, and with the company trading at around $14.00 at the time of this agreement, to the untrained eye, this didn’t seem so bad. 

But as many of us know very well, the devil is in the details. 




HMNY was projected by many analysts to be a loss making operation, and it didn’t take a rocket scientist to figure this out.  In essence, their business model was to sell 30 movie passes for the price of one, and all the subscriber had to do was pay $9.99 per month and they could go to the movies once per day for the entire year.   

To most unsuspecting victims of this scam, it seemed like a great concept — at first. The theater industry was struggling due to the rise of streaming providers like Netflix, so the idea was that if they could switch to a subscriber based payment system, this would reignite peoples desire to actually leave their house and drive to the theater. 

The problem — and this will probably surprise you — is that Moviepass didn’t buy their tickets from the theaters at a discount in a bulk purchase agreement like you would expect, they just paid the sticker price, so if a ticket cost $10.00, Moviepass still had to pay $10.00.

Basically when you break it all down, the cornerstone of their business model was the assumption that nobody would use their subscriptions.  Genius huh?  Just give people the right to do something, then hope that they are too stupid and lazy to actually do it!  

Here is how that brilliant idea panned out. 







For a company doing so poorly, the CEO’s seemed to be having a blast in this picture.




Mitch Lowe, the CEO of MoviePass, with Ted Farnsworth, the CEO of Helios and Matheson Analytics. MoviePass/Reuters



There’s something about the look on the guys face on the right, though.  Something that just kinda….rubs you the wrong way..You seeing what I’m seeing?


The investors sure weren’t happy.  One lucky fella at least got something out of it though.  He was given the great privilege of loaning out his shares by Charles Schwab, but it wasn’t like Schwab was doing the guy a favor or anything. They just turned around and lent the shares to someone else at a 100% mark up. 

You see, all that money that was rolling out of the pockets of average people wasn’t just disappearing into some black hole, it was rolling into the pockets of people like that creep pictured on the right.  


Oh yeah, remember when I said the devil is in the details? Those notes didn’t actually end up getting sold for $12 as per the initial agreement.  It turned out that any future equity offerings would immediately reprice the shares that were owed to the lender so they equaled the price of the shares issued in all future equity offerings.  If HMNY sold new shares at a price of, let’s say 50 cents, all new shares  used to pay the lenders would also have to be priced at 50 cents.  This of course resulted in  — and please excuse my french — a fuck load of new shares in circulation; a short sellers dream come true.  




No there is nothing wrong with your vision, and yes, they issued billions of new shares

 


So who did profit from this massive pump and dump?  Someone must have, right?  Well, there was a few in particular, and to your surprise, the real profiteers were not the CEO’s.  Sure they got theirs, don’t get me wrong, but there was others that stood to gain much more from this scam –100’s of millions more.  

You might also be wondering who in the hell bought all those shares?  You saw those financials; in hindsight it would seem like you would have to be either insane, or extremely stupid to do such a thing.  Who would buy into a company that is burning through that much cash on a quarterly basis? 

Short Sellers.   

Over the lifespan of this brazen scam that deprived so many innocent hard working people of their life savings, there occurred several carefully orchestrated mini pump and dumps.  These short sudden upticks were almost certainly fabricated with the primary goal of drawing people in through the allure of quick profits.  The price would go up 100% over a 2-3 week period, then the company would announce an offering, usually priced significantly lower than the current share price at the time.  You can see this happening on December. 13th, 2017 in the chart pictured below




 




When most people think of a pump and dump, they envision people buying stock before the price increases, then selling to unsuspecting investors after the pump has occurred, but you might be surprised to find out that this can also work the other way around. 

Short sellers and investment bankers can artificially inflate the share price, sell the stock to all the suckers at inflated prices, then once the market capitalization crashes back to where it belongs, they can buy them back for pennies on the dollar.  As you can see in the above chart, the share price spikes more than 50% only to suddenly reverse the very next day after news of an offering was released in the afterhours on December.12th.




 





Below is a picture of one of these unscrupulous short sellers beneficial ownership reports. 







On December 13th, Empery Asset Management bought 1 425 000 shares







You can see they report owning 1,425 000 shares on December.13th, and if you look at the volume on that chart, the date seems to line up perfectly.  What most people fail to recognize is that this institutional investor was almost certainly short prior to this sudden overnight collapse, and that this “purchase” was actually short covering so they could deliver the shares they borrowed back to the lender.  You can’t prove this because hedge funds are not required to report short positions, but you can get a pretty good idea sometimes — not always, but sometimes, and in this case it was very obvious

Watch this




 




They filed another 13-G for December.31st, only 2 weeks later, and it shows that they sold virtually all their shares.  Hmm, that’s kind of odd isn’t it?  If they were buying those shares to go long, that would have been one bad trade don’t you think?  Look at the chart again




 




It doesn’t look like they had much room to work with does it? Well, that is because they weren’t buying the shares as some kind of investment, but rather to cover a short sale.  You can see that on December.12th the price gaped up 30%, but then reversed 13% to close almost exactly where it opened, which was most likely this hedge fund dumping stock on people like Ken, that sorry old retired investor from that Business Insider article who had the audacity to take a well known investment banks analyst report at face value.  Think of it like a reverse pump and dump.  In the industry, it is referred to as “Gun and Run”.

There was also another short seller that exhibited the same “buying” pattern as Empery.




 

 




These guys are famous for this.  They, among others, have been at this for a long long time.  

Let’s take another look at one of these little “upticks”.







On April.17th, HMNY was up almost 100% from the lows reached on April.03.  Surely it would take something amazing for this kind of price increase to occur — no?




https://archive.is/bd1Ja/


There’s our man again!  Remember him?!  Just four months ago he said HMNY would be a $10 BILLION dollar business!



 





Isn’t the timing just perfect.  I’ll help you skip through all the bullshit and just tell you what his conclusion was:  he was bullish, he still thought it could go to $10 billion, and he was actually adding to his position!  He also had a new mission statement: be the “Voice of Retail”.







Let’s take a look at some of the other PR leading up to this surprise crash







Do any of you remember the Moviephone?  No?   Before smartphones went mainstream, most people had to call the theater to find out about movie showtimes, but today — obviously — this service is completely useless. In 2014, they had to discontinue their telephone service and switch to an app, but — again, obviously — you can easily find showtimes with a simple google search.  Moviephone used to be quite popular though, so much so that it was even featured on the old TV sitcom, Seinfeld — but it’s been three decades since that show was popular; before smartphones; before the internet; before facebook; before online streaming; before Tesla; before practically everything that most  people wouldn’t be able to function without today!   Buying that company would be like buying Atari 20 years ago!  What a joke!




Source Image: New York Times. Kramer (Michael Richards) as a Moviefone stand-in on a “Seinfeld” episode that lampooned the service.


That CNN headline was just ecstatic though wasn’t it?!  BLOCKBUSTER DEAL! MOVIEPASS BUYS MOVIEPHONE!!! Way to be subtle there Captain Obvious. Anything for a buck though, right?  

Then there was this guy who’s main caveat was the catch phrase, “sell-offs create value”.




 




Oh they created value alright; not for investors though — that is for sure.

The final chapter in this April fortnight pump show was this piece of news, reported on April. 16th, right before the price tanked.   Apparently even the great Verizon was now riding this fad.  Verizon!  Who would’ve thought!  If Verizon believes in it, surely it must go back up!



 


The problem with this article was that they failed to properly address one very important detail.  The shares Verizon reported owning were part of HMNY’s payment for Movietone, and Verizon was just following SEC beneficial ownership reporting rules by filing that 13-G.  They didn’t actually go out and buy HMNY’s stock in the open market like this article so subtlety seemed to be alluding to.  

 

 


If you look at the comments on ihub for that day, many people were having trouble understanding why it was up so much.


 

 


This seems to be some kind of paid stock promoter.  Notice how they put the word “higher’ in caps, then follow up by saying, “hey, just my “opinion””, wink wink.


 

 


At least this guy knew what was up.  He seemed to be the only one though


 

 


This guy is either being paid, or is just a sucker.  Probably a mix of both


 


You can read the full thread here.  

This is how the chart would have looked to your average trader.  Looks very bullish doesn’t it?


 

 


Then comes the short seller


 

 


On April.19th at 4:55pm, they announced news of an offering and the price tanked.  As you can see by that volume bar, someone made a large purchase; most likely a short seller covering.  They priced the offering after the close at $2.75 per share




It is very likely that this short seller covered with the offering shares.  It’s like an upside down pump and dump; almost guaranteed money if you know what you are doing, or even better, are privy to inside information concerning when the offering will be announced. 

You artificially inflate the price with frivolous or even outright fake PR, pump it up by placing bids to attract speculators, then you artificially change the price by offering the shares in bulk 50% lower than the current price.  How can you lose? 

Do you think I’m making this up?  All speculation, no proof you say?  The SEC and FINRA  have recently censored people for engaging in this exact same activity.  You can read about it here, and here


 




“The SEC alleges that a former day trader living in California, Steven Fishoff, schemed with two friends and his brother-in-law to pose as legitimate portfolio managers and induce investment bankers to bring them “over the wall” and share confidential information about an upcoming secondary offering. After promising they wouldn’t disclose the nonpublic information to others or trade an issuer’s stock before an offering was announced, they violated the agreements and tipped each other about the upcoming offerings expected to inherently depress the price of the issuer’s stock. The tippees then shorted the stock before an offering was publicly announced and assured themselves profits on the short sales after the stock price dropped”.

Basically, the key take away is that if you’re an institutional investor, apparently you are allowed to know about secondary offerings before everybody else. 

In the book Reminiscences of a Stock Operator,  Jesse Livermore explains in stark detail how he would manipulate stock prices by bidding them up, selling, and providing support at key areas.  He mentions this several times in the book.  This is coming from a person who during his heyday was one of the most well known financial personalities in America.  Funny that the only place you will find somebody admitting to this is in a 100 year old Roman à clef

Maybe by releasing this book Livermore was in fact trying to be the very “Wall Street Philanthropist” he so often sarcastically referred to.  He mentions several times his discontent with the use of the print media to suck unsuspecting investors into buying  stock that is controlled by a small pool of insiders looking to profit from their information advantage.

 

 

By tape he is referring to the price action of a stock.

 



On April.16th, people on ihub seemed to be confused as to why the share price was up 30%.  Yes, Verizon reported 10% ownership in a 13-G, and even though this news seemed to be misunderstood by hopeful shareholders — who at the time, would’ve probably taken anything at face value because they were so desperate — it occurred on Friday, not Monday, and this beneficial ownership report was filed at 1pm; not after the close or over the weekend.  This, combined with the offering only two days later, should cause you to be suspicious. 

 

 


A reverse pump and dump.


 


It didn’t end here though.  Everybody was getting involved in the action.  Even Citadel, a firm run by the great Kenneth Griffin himself looked to be shorting this thing. 


 

 


You can see that he reported “ownership” of 4.5 million shares on May.10th, but you can rest assured that he probably didn’t buy this as a long term investment.   He may look absolutely insane, but he is definitely not stupid.  I don’t know him personally, but what I do know is that no Ivy league educated financial genius who runs one of the largest financial services company’s in the world would be so stupid as to buy into this — not in a million years.  Only two days prior, HMNY had reported an average cash deficit of $21.7 million per month from September to April, while also disclosing only 15 million in available cash on hand, and this was after raising all that money.  If you think Kenneth Griffin is that stupid, you are living in la la land.  The guy literally lives and breaths the stock market, and has been doing so since 1987

Citadel has only filed one  13-G since May, and it showed that they still owned 5540 shares.  This number reflects the 1 for 250 reverse split initiated by HMNY on July.25th, 2018.  and when you multiply 5540 by 250, you get 1,385,000, so you can be almost certain that he used the rest to cover a short position.  Why Citadel is still holding the other 39% of this position is a mystery though. 



You don’t usually see Griffin around these parts though, that’s for sure.  For stocks like these, it’s typically guys like Empery Asset Management, LP and CVI Investments, Inc. (among a few others) that buy these small caps, and not the big firms.  You would never see Goldman Sach’s filing a 13-G for one of these pieces of shit –ever.  

Citadel wasn’t the only big wig in town either.  The great Morgan Stanley even jumped along for the ride.   This is an obvious short.


 

 


There was even Rabbi’s involved ffs!


 

 


You don’t usually see him around either.  He was one of the two underwriters that brokered most of HMNY’s debt and equity financing


 

 


It’s not rocket science folks..


 


Also, for some strange reason they valued Moviepass at $210 000 000 in October of 2017



But as they incurred bigger losses, strangely, the valuation didn’t go down, but up.  Go figure



Here is the kicker.  Are you ready for this?  Remember all those shares they issued? 


 


Quite a bit of shares eh? They raised $188 397 936 all together, and guess what?  That barely covered  the cost of buying Moviepass!  So all that money that they raised by diluting the value of your investment was used to buy a company that had total assets valued at the hefty premium of $300 thousand dollars, less than the price of your average American home!  The domain name was worth 25 grand, and the “property, plant, and equipment” was equivalent to a two bedroom household  somewhere in the country side of Alabama. 



Like I said before, this kind of activity is just business as usual on Wall Street, especially in the penny stock sector.  They pump up the share price ahead of an offering, short it, than cover once the company’s PPS is artificially lowered in the equity offering. Think about it for a second.  How else would they be able to raise money for these failing companies if not for this manipulative activity?  I could show you hundreds of examples of these “reverse pump and dumps”.  They occur almost on an daily basis.    

On December.07 at 8:06am, TNXP spiked 111%.  This sudden parabolic move somehow just kind of….happened.   There was no news whatsoever.  

Eventually though, this news did in fact eventually break.  Do you wanna take wild guess what it was?


 



You guessed it!  We are abruptly changing the price!



 

 


From $7.27 to $3.50!


 

 

 



Here is CVI again, our HMNY short seller from December.13th, 2017.



 

 

This time they held, but they can offset much of the risk by loaning out their shares. The typical borrow rate for one of these pharmaceutical pump and dumps averages out to about 50% per year. Also, since the volume was 5 times higher than TNXP’s total outstanding shares at the time, they could’ve shorted more shares than they reported in this beneficial ownership report — but that’s just speculation, as you can never be quite sure of what these people are doing unfortunately…

 

Courtesy Iborrowdesk.com

 


This one was just outrageous.  VISL


 



Do I even need to show you the news?



 



Are you starting to understand?  Sell first, ask questions later; a reverse pump and dump, or to use the industry term, “Gun and Run”.



 

Take a look at these comments on yahoo.  For the ones that actually read the filings in the small cap community (for which there is few) it is just a known fact that anytime you see these hedge funds file a 13-G, it is pretty much a guaranteed short opportunity. 

One of these spectators took note of the fact that they miraculously paid off their debt.  Shouldn’t we just be happy for them?   Ask yourself this question:  if they are a loss making business, and have been so for some time now, where do you think all that money comes from?  The answer is you, us  — everybody but Wall Street pays off their debt.  

 




XBIO is another great example of this Gun and Run tactic.  This one would’ve made Jesse Livermore proud.



 


Quite the payoff for anybody who was short.  The share price is sitting at $1.00 now


 

 

 

Altium Capital Management is run by a hedge fund manager named Jacob Gottlieb, a man with decades of experience on Wall Street. Apparently his fund returns 7.37% per year for investors, so it’s probably pretty safe to say that he is in the same league as people like Kenneth Griffin.  Considering this, wouldn’t you find it strange if his fund was still holding this “investment”?  Or even better, wouldn’t his investors?  Just imagine  if you were invested in this fund and you found out that your fund manager was using your money to buy companies that crash 80% in less than a month.  You’d probably be asking for it back I bet.   Also, if you browse through their filings, it looks like it has a lot further to go before it bottoms (if it ever bottoms)




The key word there is substantial.  That is one thing the SEC is still good at; forcing people to report their activities regardless of how bad things may look for the company.  They may not get enough people in trouble, but they still seem to be getting that part right — at least.





You really think he just bought all that stock without shorting prior to the offering?  Gimme a break.  If you really think that then I don’t know what else to say to you at this point.  If you actually believe he just bought all those shares without hedging his bet, I’m going to take a wild guess about something:  you probably haven’t been following financial news lately. If you showed this to the average Wall Street veteran, or even most financial journalists these days, they wouldn’t be surprised at all.  One Barclays employee pretty much sums up the state of our financial markets in one short sentence.

If you would like to get caught up on your stock market scandal history, I must warn you:  it is very long.  Nobody that is sane can thoroughly read through this link and not think something is very wrong here.

Are you still skeptical?  Okay, I’ll do one more, but after this I’ll leave the rest up to you.  You should know what to look for at this point.  Brace yourself though, because this last example is truly mystifying.

 





 

 

 

 




 

That chart pattern almost looks absurd doesn’t it?  It might look so outrageous that you begin to  experience what is known as cognitive dissonance, an unfortunate symptom exhibited by most victims of these daily Wall Street penny stock scams, so make sure you lean in close and carefully look at the prices on that chart.  Do you see the range?  It went as high as $17 only to suddenly crash all the way down to $3.56, and this happened spontaneously while hundreds of people were trading this stock.  If you were one of the unfortunate victims of this abrupt “change” to the share price, it would have seemed like one minute everything was fine, then the next you were suddenly down 70%.  If that doesn’t strike you as a form of theft, then I don’t know what does.

Just wait until I show you what happens next. I’m certain that once you finish this last section you will be convinced, but let’s get back to the story.


Do you think you can guess why this happened?   If you’ve made it this far, I’m sure it should be easy to figure out by now. Right around lunch time they announced the offering.


 

 


The news halted the stock several times, and for much longer than is typical for your daily run o’ the mill
Wall Street pump and dump


 

 

So what was this amazing news that caused the share price to go up 100% in a matter of a few hours, released at 6:16am ET, bright and early in the morning?  Check out the image below.  

 

 

Maybe evidence of this upcoming event was buried deep within their filings, and whether it is even true is open to debate, but the point is more that they used this miraculously timed PR to justify the obvious market manipulation that occurred in the premarket. 

Considering the dismal state of the company at the time, this PR didn’t justify this kind of price reaction at all.  They had very little in terms of business operations due to the the loss of their primary government contract and they also faced being delisted by the NASDAQ.   In addition, they were forced to sell all of the assets connected to the execution of this contract for half of their carrying value, while at the same time reducing their outstanding share capital by a factor 50!  For most people that would be a nightmare, but you have to remember that we are dealing with Wall Street here, where anything listed on the NASDAQ can be turned into a profit generating scheme, regardless of how terrible the business model may be. 

 

 


As you can see, they were ordered to cease all activities related to their “BARDA” contract in light of difficulty of enrolling patients for their RELIEF trials.


 



What was also very telling was the fact that there was so little work in their financial department that the CEO was forced to take over the position because their Vice President of Finance had recently stepped down, and this was someone who had only been with the company for 1 month. That’s two directors of finance in a two month period.  This is why that news seemed so strange at the time.  



 

 

 

 

 

 

 

 

 

What I am about to show you is something that is extremely hard to find; something that I recently stumbled upon by pure chance.  I couldn’t believe my eyes when I saw this, and quite frankly, you might not either.   It is 100% irrefutable proof that these hedge funds are perfectly capable of knowing about these stock offerings before everybody else, and if you were skeptical up to this point, I can guarantee to you that after finishing this last section, you will surely be convinced. 

 

  Watch this.

 

 

 




So the information is just readily available to anybody who cares to look?  Hmm, is there some other newswire that we are all missing?  Does Bloomberg Terminal now offer material non-public inside information to their subscribers in a special limited time deluxe package deal?   

The press release was made public at 12:15pm, and for some reason this person knew about it before everybody else at 11:44am, exactly thirty-one minutes before the price tanked.  According to one of the people in this conversation, there is apparently nothing wrong with this at all.  Everything A-OK, nothing to see here folks. 

You have to wonder now, if some idiot on stocktwits is capable of knowing about an upcoming stock  offering 30 minutes before the news is released to the public, is it really a stretch of the imagination to think that these hedge funds are just as capable of accessing this same kind of information?




What is even more shocking is the fact that all this activity — if that’s what we want to call it — is completely acknowledged by the media.   According to Matt Levine, a well known financial writer for Bloomberg News, all of this egregious market manipulation (theft) is all just “help”.  Seriously, check out this quote:

“Though you could have a more cynical view of this sort of thing. A company needs to sell stock, but worries that announcing a public offering will drive down its stock price and not produce any takers. So it calls some investors up privately and tells them it’s doing a deal. Those investors agree to invest in the deal, but before the deal is announced they lay off their risk by shorting the company’s stock. Then the deal is announced and the investors buy shares from the company to (illegally) cover their shorts. The investors get their 10 percent, or whatever, discount to the market price as a commission; their real function is not to invest in the deal but to intermediate between the company (which can’t sell stock without a publicly disclosed offering) and the unsuspecting public (which buys from the “investors” before the public disclosure). The wall-cross agreement creates deniability for the company. No one’s stealing from the company; they’re helping the company get a deal done that would otherwise be much harder to achieve. The victims are the public who buy from the insider traders at the inflated, pre-announcement price”.

“That doesn’t seem to have happened here: These guys didn’t end up actually buying much stock in many of these deals, so the issuers couldn’t really have been using them to illegally distribute stock. But it is a classic feature of penny-stock financing that we’ve discussed before, and if I were defending Fishoff and friends it’s an angle that I might explore. These guys didn’t steal from the companies whose stock they insider traded: They helped those companies raise money that they otherwise would have had a harder time raising. Sure, they did so in a way that was really unfair to public investors. But remember: Fairness isn’t the goal of insider trading law”.  Full Article (use this link if it doesn’t work)

Just help?  So Vislink, and HMNY are just “help”?  Tonix, PSTV and the hundreds of other examples; all “just help”?  Is this for real?  Am I seeing things here?  

We’re talking about billions upon billions of dollars that is, by all intensive purposes, being stolen — siphoned off from the economy — yet the only thing that this highly respected financial writer for Bloomberg News has to say about this — after all the intentional misrepresentations; after all the lies; and, of course, we can’t forget, after all of the innocent, hard-working people losing their life savings — is that it’s all just……. “help”?”

That — for lack of a better word — is atrocious.   

If you are still skeptical after reading all this, or still do not think something is very wrong with this picture, then I don’t know what else to say at this point; but if you are finally convinced, then all that is really left for me to do is remind everybody of the broader implications that arise when you manipulate markets in such a way that it results in failing companies funding themselves by stealing from average hard working people

The bankers might argue that they are providing these companies with “liquidity”, but if you are a purist when it comes to interpreting the theory of capitalism, you have to ask this question: isn’t the invisible hand capable of doing this by itself?  Perhaps the bankers have lost faith in Adam Smith following the financial crisis, deciding to instead create their own invisible hand, one that is self serving and selective rather than impartial and omnipresent; a bankers capitalism, made in their own image, and not for the benefit of the collective, but for themselves.   

Are they, as they will constantly reiterate, still just raising liquidity at this point, or is something much more pernicious taking place; something that is the definition of absolute evil:  a mirror image facsimile posing as something altruistic, who’s only purpose is to feed off its host, completely apathetic to the destruction it inflicts on the very thing that gives it life. 


 



What if I were to tell you that activity similar to what I just showed you was happening all the time with IPO’s.  Would you believe me?  Probably not, right? That’s just not possible you may think — there is too much money on the line.  Certainly the authorities would have intervened by now and put a stop this – no?  The impact on the economy would be disastrous; there is no way something like this would be possible on such a grand scale. 

 

 

 

 

Source image: https://www.vox.com/2019/3/21/18274843/unprofitable-tech-unicorn-ipo-stock-market-profit
Source image: https://www.vox.com/2019/3/6/18249997/lyft-uber-ipo-public-profit

 


During the dot-com bubble, IPO’s were breaking records.   To put that into perspective,  the average first-day return from an initial public offering increased from 7% in the 1980s to 15% from 1990-1998, but during the period of 1999-2000, the first day return increased to 65%.

 

From Underwriter Manipulation in Initial Public Offerings.  By Rajesh K. Aggarwal, Amiyatosh K. Purnanandam, and Guojun Wu

 

How this was happening was due to a scheme known as laddering.   Since most hot IPO’s are highly sought after, investment banks decided to make deals with their top customers (hedge funds) where in order for them to get their hands on one of these IPO’s, they would be obligated to buy extra shares when it opened for trading on a public exchange. 

They would do this with multiple customers creating a price ladder, and each customer would agree to buy at a specified price as it moved up the chain.  Let’s say the investment bank does some research and ascertains that based upon the current market conditions, the safest price to open the stock would be at $50 per share.  With laddering, they could technically open the price at whatever  they wanted by forcing their customers to buy at predetermined levels.   

If everything were to go as planned, traders and investors might see this and think that because the price was going higher, people must be buying, and that if people were buying, it must be a good investment.   In essence, it was just a way for investment banks to trick investors into overpaying for a security. 

 

Underwriter Manipulation in Initial Public Offerings, Rajesh K. Aggarwal, University of Minnesota; Amiyatosh K. Purnanandam, University of Michigan; Guojun Wu, University of Houston


“J.P. Morgan encouraged customers providing aftermarket interest to increase the prices they were willing to pay typically because other customers seeking allocations had provided aftermarket interest at higher prices. For example, a sales representative told a customer that their aftermarket price limit was “sort of out of the game” and there was “interest at much higher levels.” In the Dyax IPO, a sales representative told the syndicate desk in an e-mail, “If the customer gets 50,000 IPO shares, he will buy 50,000 more (up to $16). If need be, I will tell him to increase his aftermarket price sensitivity to a higher number.”

Read more about how this works


 



CHWY is a perfect example of an over priced IPO.  About two months ago it was trading at 18x gross profit, which is basically the money they make before paying for operational costs like SG&A, interest, taxes, depreciation and amortization. They operate at a loss, and they sell pet food.  How innovative!


  

 

This one was just horrific — Livongo.  




(Update, May. 14th,2020)  

***Livingo is still a good company and looks to have lucked out from this recent coronavirus outbreak.   As of the time of writing it is sitting at around $60.00, up almost 200% over a period of 6 weeks,  but the point was more to highlight the unusual pattern you tend to see with IPO’s, where they will open strong, then over a period of 2 to 3 months, completely tank. 

Don’t forget, the Fed recently just bailed out the banks, announcing plans to expand the balance sheet by as much as $4 trillion.  Also, while analysts have been warning of unemployment numbers not seen  since the Great Depression,  the stock market has somehow managed to spike 30%.  Very unusual circumstances.****

S&P 500 Monthly Chart Courtesy Tradingview

 

 

The same goes for Chewy, a stock many analysts have criticized due to its inflated valuation.  David Einhorn  was even quoted as saying that he thought it was worse than Pets.com from the dot.com bubble.

These examples are just thought experiments.  There’s no actual physical evidence of laddering **


But let’s get back to the story


 

 

 



This is one of the worst performing IPO of the year, but take a look at the variance on that first day — it’s nearly 40%.  Unfortunately, if you were one of those “early investors” that bought at the top of this pump and dump, your investment would be worth a fraction of your initial cost, and the only way for you to come close to breaking even would be if the share price were to go up by as much as 700%.  

If you would like to investigate some of this years IPO’s yourself, check out  this website








In closing, I think I feel the need to remind everybody of the fact that I just took a shot at virtually every financial giant in America, so don’t be surprised if you find out one day that I was taken away to a dungeon somewhere in the Jersey Islands surrounded by some kind of 21st century moat, and run by some sort of rich, deranged Jeffrey Epstein like figure.  

They already turn our webcams on every time we open youtube to watch our favourite videos, listen to all our conversations (and archive them in data centers “just in case”), shadowban anybody who expresses a divisive opinion, and now block and monitor private messages to protect us from sinister and potentially life threatening spam mail, so I wouldn’t put it past them.  Unfortunately, because of this dystopian nightmare that is now a reality, very few people will get the chance to read this report. 

 It might sound funny because it seems so absurd. Wolf of Wall Street was funny, but as most grown adults know very well, reality is much different than how it is portrayed in a movie.  Wolf of Wall Street was not real.  This is not a movie; this is real life, and there are real life victims, and truly real ramifications. 

Money is health; money is time; money is family; money is stability; money can mean life, or death; money is memories, experience; growth, discovery.  To most people, as much as they wouldn’t like to admit it, money is everything. 

Whenever the conversation may turn to the topic of wealth, the rich will always defer to the age old adage, “money doesn’t buy you happiness”, as if to feign humility — and to some extent there may be some truth to that statement.   But might I remind them of another well known adage: you don’t know what you’ve lost until it’s gone. 

 

Cheers everyone.  See you on the other side

 

 

 

 

From Reminiscences of a Stock Operator


 

 

 

 

 

 

 

42 thoughts on “How Underwriters and Short Sellers Manipulate Share Prices Ahead of Stock Offerings

  • Pingback: The Financial Oligarchs

  • Pingback: Workhorse Group: Crony Capitalism at its Worst, Market Manipulation at its Best..

  • July 4, 2020 at 11:58 pm
    Permalink

    I randomly stumbled across this blog post and learned a lot. I appreciate the amount of effort that went into it. Thank you!

    Reply
  • Pingback: Reminiscences of a Stock Algorithm

  • Pingback: Reminiscences of a Stock Algorithm

  • Pingback: This Reddit Thread on R/Pennystocks Looks Like it’s Part of Some Kind of a Paid Marketing Campaign..

  • Pingback: Reminiscences of a Stock Algorithm

  • February 1, 2020 at 7:26 pm
    Permalink

    Hello! Thank you for taking the time to compose this article and provide detailed information. I can’t remember the last time I read such an enjoyable article that addressed many of the things I have been wondering about for quite some time. Do you have a twitter account or a contact email where questions may be asked? If possible, I would like to discuss the timing of some of these filings in regards to the moves on the charts. I am an active short-seller and would appreciate your input. I am also happy to aid you with research if necessary.

    Reply
    • February 1, 2020 at 8:18 pm
      Permalink

      Go through these funds and compare their transactions to the chart. secinfo has been around since the 90’s. It’s old school but it works. Click “all” and it will display every single one of their transactions, although some of them keep changing their company, but you can still find them because they usually keep the same name, which I’m assuming is because they want to make it easier for old clients to find them, but I don’t know that
      https://interactiveswingtrading.com/small-cap-funds-market-makers/ >

      The most recent examples of this have been $GHSI $ACHV $SNCA $AMRN. Those are the ones I remember just off the top of my head, but there 100% has been MANY more. It seems like it’s almost a daily occurrence — almost as if it is just a standard industry practice for IPO’s and secondary offerings. They pump it up by placing bids, then short it to everybody else at artificially inflated prices.

      You buy 100 000 shares for a little bit higher, then you sell triple the stock — so 300 000 (just an example) — for a little bit lower, but you know the price is going to tank because the only reason it is up so high is because of you. Then when the price tanks, you buy back the stock — sometimes for pennies on the dollar. It’s just how they do it.

      Now, it’s always going work differently because no situation is the same, and that is just one example. It probably doesn’t always work as planned either, but that’s the gist. Pump up the share price by placing bids, short it to all the suckers, then buy it back after it crashes. Some of them can even sell stock that doesn’t actually exist because they can just claim they are able to secure a “locate” from the company, or wherever. It’s important to understand that stock trades are simply just broker to broker transactions. Martin Shkreli tried doing something like this but he botched it or something..
      https://stocktrades.exchange/2019/12/03/real-life-example-of-naked-short-fail-to-deliver/

      Another example here. There’s all kinds of tricks they can use
      https://archive.is/Mo0Xh#selection-1619.0-1669.13

      They can use corrupt lawyers and former regulators to legally justify the fraud by inventing legal loopholes which they can use to argue that they didn’t have criminal intent, so even if they do end up getting caught for whatever BS they’re involved in, they can just pretend like they didn’t mean to do anything wrong because a group of experts said that they could do it!…
      https://stocktrades.exchange/2020/05/14/smcfsmctcomcs/

      They can get other people to short it for them through collars, what they refer to as “executive hedging”
      https://stocktrades.exchange/2019/09/14/executive-hedging/

      As the saying goes, “The Business Model of Wall Street is Fraud”, and honestly, that’s just the truth. try reading through this entire website someday (before it’s gone)… It’s unreal, and none of them ever go to jail…Quite frankly, I didn’t know it was this bad until I started this website ….
      https://stocktrades.exchange/scandals/

      “The development of our financial oligarchy followed, in this respect, lines with which the history of political despotism has familiarized us: usurpation, proceeding by gradual encroachment rather than by violent acts; subtle and often long-concealed concentration of distinct functions….
      ……which are beneficent when separately administered, and dangerous only when combined in the same persons. It was by processes such as these that Caesar Augustus became master of Rome. The makers of our own Constitution had in mind similar dangers to our political liberty when they provided so carefully for the separation of governmental powers”.

      (1914) Other People’s Money and How the Bankers Use It– Chapter I: Our Financial Oligarchy

      Reply
      • February 2, 2020 at 10:46 am
        Permalink

        Thank you so much for taking the time here to explain all of this and for sending the additional links—all very interesting reads! So in a way, I assume that their agendas involve buying offering shares from an underwriter which includes warrants or convertible debt to be later used as hedge. Then they can unload this and the price goes down as they short into it.

        Just curious, in regards to 13G filings, I understand that some have to be filed within 10 days of the purchase, whereas others are able to be filed 45 days after the end of each year. This would make sense as to why funds such as Empery, Sabby and CVI have a LOT of 13G filings every year in January. A recent example of said “manipulation” is their recent involvement in NNVC. In this case, I feel it’s safe to assume that this applies to the 10-day rule since there would have been no way for them to predict the virus outbreak before 2020. The selling could have occurred this past Tuesday due to the action on the chart, but likely not since the stock is still going higher. However, for all of the other filings each January, it seems that many of them could be well in the past. Is this correct?

        Reply
        • February 2, 2020 at 12:02 pm
          Permalink

          From what I understand, they have 45 days to report their positions as of December.31 after the turn of the new year. For example last year Anson filed several 13-G’s on February.14th https://www.secinfo.com/$/SEC/Filings.asp?CIK=1491072&Find=&List=Hits&Show=Each&Page=3

          I haven’t followed NNVC, but the price action reminds me of MBOT, so it could have some breadth and may be something to look into. The 13-G is different than the 13-D in that you aren’t forced to update any position changes until the turn of the new year. They seem to update year end positions at different intervals, though.

          The way I see it, you can compare these funds and their relationship to H.C.W to Goldman and their relationship with funds like Renaissance Technologies and SAC Capital. H.C.W probably has prime brokerage services that it only offers to preferred customers, like Sabby, and Anson, etc. They are in some ways probably one in the same.

          Reply
          • February 2, 2020 at 12:12 pm
            Permalink

            Ah okay, that makes sense! So, that means I’ll have to be savvy about tracking these things because some of the filings into the new year may carry over, assuming they haven’t sold all of their existing positions. There are definitely websites out there that seem to make it easier to track when positions have been officially closed. Here’s one that I have found:
            https://fintel.io/i/empery-asset-management-lp

            I guess the way to handle this situation, since not everything is 100% obvious with timing JUST from the filings, is to have said stock on your radar from whatever technical strategy you abide by and then look at the filings as an enhancement. If they happen to match up (which, oddly enough, I find that my technical strategy and news releases often match up as a “coincidence”), then that’s easier to play and not become overly-biased in the interim/ expose yourself to a squeeze before the true backside.

            Reply
            • February 2, 2020 at 12:22 pm
              Permalink

              Yeah the filings only tell you so much as a trader, there’s still going to be uncertainty. Conspiracy theorizing might actually hurt you lol, because you can never really be certain of what they are doing. These laddering IPO cases are good to read too. There’s probably other aspects of the 13-G process that could reveal more clues that I am unaware of too. What’s also helpful is knowing who’s involved, like for instance Ladenburg Thalmann; they’re…..”good” lol

              Laddering cases –>https://archive.is/5rHZ3

              Reply
              • February 2, 2020 at 12:30 pm
                Permalink

                I agree. I talk to a lot of people who seem to be very invested in things like 5550b and, to me, that does not seem like a viable strategy as a retail trader: there are so many things that could interfere with being delisted, such as bid propping for a reverse split or, just paying overnight interest that eats up all of your profits by the time you actually do cover…

                For me, if something gaps up and is on my radar, I like to do a quick sweep and see if I see any of the sketchy names of funds, just to think, “okay, there’s obviously something sketchy going on here, no need to spend hours developing a thesis because that’s all I need to know.” Then, of course, a stock that gaps and has an ATM or warrants is always good to see because that increases the likelihood of a fade.

                Reply
                • February 2, 2020 at 12:35 pm
                  Permalink

                  Stockswoosh, you know her? She pays to go Fox Business, quarky looking one she is. Charges 10K for her course. She swears by the short the gap up. Apparently that’s all she does. I don’t know much about her, I’ve just seen her around over the years. She makes 40k per month apparently just from trading.

                  Reply
                  • February 2, 2020 at 2:14 pm
                    Permalink

                    Haha funny you mention that because I’m a female trader as well. However, I am always skeptical of people who have services with high prices, especially if they supposedly make that much. My mentors always helped for free or kept the knowledge on an invite only basis if they were going to coach a group.

                    Reply
            • February 2, 2020 at 12:31 pm
              Permalink

              Also I recommend using secinfo in place of fintel as I suspect they collect all kinds of data on people. secinfo has been around since the 90’s and all information is instantly updated

              Reply
              • February 2, 2020 at 12:35 pm
                Permalink

                Thanks! I usually use bamsec though because I have a login. Easier to have the info sorted in one place.

                Reply
              • February 2, 2020 at 12:36 pm
                Permalink

                Thanks! I actually use bamsec usually because I have a login. Much easier to see everything organized on one page that way.

                Reply
              • February 2, 2020 at 12:38 pm
                Permalink

                Or bamsec works. I use that with a login. Nice to see everything in the same place

                Reply
                • February 2, 2020 at 12:42 pm
                  Permalink

                  I just like the old school aspect of secinfo. Don’t like all the noise. It’s the first one I found

                  Reply
                  • February 2, 2020 at 2:05 pm
                    Permalink

                    Oops sorry for the repeat messages before. I didn’t see them immediately post, so I typed again and I thought there was an issue with my browser.

                    Thanks for all the links– I love reading this stuff! I’m so glad I came across this blog when I happened to be googling Empery. There are very few things online that really get into the details and I can tell you are passionate about this work. Do you trade full time on top of your writing/ research?

                    Reply
  • January 5, 2020 at 5:45 pm
    Permalink

    Excellent article. I have been trading large positions since 2008, with a few hundred invested on any given day. I have seen this eveidenced in the real world many, many times. It is easy to verify if you doubt it. Read the filings of people like Empry, Sabby, and track the penny stocks they buy. It’s like clockwork for these guys.

    This is a MUST READ and should be shared in all of penny land.

    Reply
  • December 29, 2019 at 2:16 pm
    Permalink

    Lol stop crying about it and learn the game

    Reply
  • December 27, 2019 at 10:34 pm
    Permalink

    thanks for posting this online. now i understand why AMRS was dropping like crazy back in Dec 2018, b/c they took loan from CVI… damn it. much appreciated man

    Reply
  • December 18, 2019 at 12:32 pm
    Permalink

    Hi, do you think same strategy is going on with AMRN ?

    Reply
    • December 18, 2019 at 12:40 pm
      Permalink

      It happened on Monday, the day after the FDA approval. They might have seen or expected large orders, so they pumped it up in the premarket and afterhours, then shorted it to everyone at inflated levels.

      Reply
  • December 11, 2019 at 11:45 am
    Permalink

    Can you look at Dyadic International, Inc. (DYAI). Shorts appear to be piling in and trying to figure out the reason behind it or who can be short. Stock is mostly owned by insiders so not sure what motive is. Don’t they have to buy the shares back?

    Reply
  • December 6, 2019 at 1:29 am
    Permalink

    Take a look at Ampio Pharma. I am sick to my stomach. Empery and CVI own 25m shares collectively. Guess what the trading volume was on 6/14 and 6/17. EXACTLY 25m! They both took part in the offering. Remember they already bought up all the shares prior to announcement. The charts are exactly the same as in the article for HMNY. What do they do with their shares after they make their play? Perhaps this is what the SEC is currently investigating.

    Reply
    • December 6, 2019 at 9:34 pm
      Permalink

      Here’s how it usually goes. Pump up the share price to artificial levels, draw in a crowd, then short sell the stock to people at artificial levels.

      When the share price collapses, they cover their shorts with the shares from the offering.

      Think of the stock like a store in the mall. Some days there will be nobody that shows up, and other days they do. This website is very similar. Still to this day, after all of the posts, there is one link that has remained as my most clicked, and it was right around when I first started the site. This was before the bots on reddit tagged me as a spammer, and it blows all the other links away. Also, most of the clicks occurred during a 30 minute period, so after all the hard work, and all of the articles written on this website, it only took 30 minutes for this post to receive more clicks than any of my other links.

      I’m telling you this story because I think it helps put into perspective how they are able to sell all this stock in such a short period of time. Once the crowd really comes in, and the stock is trending, it doesn’t take long for them to unload millions and millions of shares. There is no doorway or obstruction that prevents people from entering the store in the stock market. Once it starts trending, 10’s of thousands of people could potentially buy within a few hours.

      Reply
  • November 8, 2019 at 6:02 pm
    Permalink

    In the case of VISL, there was really only one tute involved, Iroquois Capital Management. All the rest sold their positions before the the July robbery. PSTV had no identifiable tutes in Sept. It looks like this was an insider job, which is particularly demoralizing for the retail investor.

    I asked the original question because I avoid almost any stock where Sabby or Empery are involved, like GHSI where they are the ONLY tutes. I prefer small caps like ACRS where tute holdings are 112% of outstanding shares and they are distributed among a dozen tutes. By the way, your article is getting good distribution on Stocktwits. Hopefully it educates some folks. Great work. If you ever need help with your research, I might be able to lend a hand.

    Reply
  • November 6, 2019 at 7:33 pm
    Permalink

    Fascinating article. I assume this kind of manipulation is possible when only one or a few whales, like Empery or Sabby, are involved. Is this kind of manipulation likely when there are 15 or 20 tutes with interest in a stock? Thanks.

    Reply
    • November 6, 2019 at 7:53 pm
      Permalink

      I’m not too sure. My guess — and this is purely speculation — is that they run they these pump and dumps similar to those tie-in agreements (laddering, mentioned at the end of the article) but only backwards.

      Instead of demanding the hedge fund make ‘after-market’ purchases, they request that they make pre-offering purchases. Once this happens, the underwriter agrees to issue them stock that they can use to short. In most of these cases when the price is up 100%++, there is usually not enough stock available to short .,but because an underwriter is allowed to naked short stock, what I think they do is just invent stock (naked shorting), sell it to the hedge funds, then get the hedge fund to sell it to all the suckers at those ridiculously inflated prices. The fund then buys the stock back from the underwriter to cover their short, gives whatever fake stock back to the underwriter, then keeps the difference

      This is purely speculation though, but I think I’m right. How else would they be able to pull off scams like PSTV, VISL, and the hundreds and hundreds of other examples. In Japan they only allow the share price to go up so much intraday before it halts. They should apply these rules to stocks under 5 dollars

      Also, what is even more pathetic about this is that Matt Levine, probably the most respected financial writer on Wall Street, says that this is all just “help”. What a fuckin joke. Everyone just grovels to the guy too. Check this out. He did an AMA on Reddit a few years ago and everybody was treating him like a god. https://www.reddit.com/r/badeconomics/comments/6cnzs8/matt_levine_of_bloomberg_view_ama_starts_on_524/

      This is the world we live in folks.

      Reply
      • December 26, 2019 at 11:55 am
        Permalink

        excellent article! Please review ACHV and Stocktwits. Same scam happened recently and of course “Cvi investments” involved againt

        Reply

Leave a Reply

%d bloggers like this: