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Stock Trading Stock Trading Strategy & Education
Stock Basher
Reviewed by Lucas Downey
Updated Oct 2, 2019
What Is a Stock Basher?
A stock basher is a person engaging in an illegal type of market manipulation to make the price of an asset fall. Stock bashers rely on misinformation campaigns to decrease confidence in a stock, leading to an undervaluation of that stock. In some cases, a stock basher may have a position in the asset which benefits from a fall in price.
Understanding Stock Bashers
The term stock basher refers to a person who spreads false or exaggerated claims against a public company in attempt to devalue a stock. The purpose of stock bashing is usually to drive down the price of a stock so that the stock basher, or the basher’s employer, may purchase the stock at a lower price than it would otherwise be worth.
Bashers create misinformation campaigns, often claiming to have inside information on specific stocks or making hyperbolic claims about future performance of a stock. Stock bashers tend to target stocks of smaller companies rather than widely-held stocks because the markets are more easily manipulated.
In most cases, the stock basher will directly benefit by spreading highly negative rumors, hoping that investors will believe the false claims and sell their stock before it fails This allows the basher and their backers to purchase the stock and reap greater gains. While this seems to be the primary motivation for most stock bashing, some analysts also speculate that some bashers are simply former employees or stakeholders in a company pursuing revenge.
For example, stock bashers may target an investment firm that has notes that convert for more shares at a lowered price. If shareholders can be convinced that their holdings are worthless, and bashers can drive down the stock price, the investment firm receives an increased amount of shares. When the stock conversion completes, bashers who have acquired shares through this means will typically sell quickly as prices rise. This is sometimes known as a pump and dump scheme.
Whether a stock basher acts alone or on behalf of another party, the practice is an unlawful form of market manipulation and carries significant legal repercussions.
The Presence of Stock Bashers in Online Forums
Stock bashing often occurs in online investing platforms, and as such bashers can be difficult to identify and eradicate due to anonymity tactics on the internet.
As the internet has made participation in the stock market more accessible to more people, new investors emerging in the market are especially vulnerable to the tactics of stock bashers, and many investor boards exist to attempt to track perpetrators.
Though notoriously difficult to track, some bashers have been identified and prosecuted, and from time to time confessional essays about the tactics of bashers emerge online, although these essays are typically also either anonymous or pseudonymous.
Many investors speculate that the behavior of bashers tends to follow certain patterns, including a tendency for bashers to only bash stocks which are generally trending upwards and showing potential.
https://www.investopedia.com/terms/s/stockbasher.asp