Money Stuff: Pump and Dump and Pull the Rug
Matt Levine, 01 July 2021
Here’s a thing you can do. You start a company and sell some stock to the public. You say “we are a good company and we plan to do good things, give us money to do them.” You sell, say, 10% of the company to the public at a low price. You keep the other 90% for yourself, as the founder of the company. Then you start putting out press releases saying “we did a bunch of good things!” These press releases are not true. Also you buy a bit of the publicly traded stock for yourself, to create volume and move the price up. Investors read the press releases and see the buying activity, and they think the stock is good. So they buy it. The stock — the 10% that is publicly traded — goes up. The price is now high. Then what you do is, you sell your stock — the 90% that you kept — at the new high price. Then you close up the company and move on to your next scam. Continue reading “Article: Money Stuff: Pump and Dump and Pull the Rug”
A recurring theme of this column is that if you have the power to make the price of a financial asset go up, you should (1) do that but (2) buy a lot of it first. So for instance Tesla Inc. is a big company and its chief executive officer, Elon Musk, is a famous influential guy with a lot of Twitter followers. So when Tesla announced that it would start accepting Bitcoin as payment for its cars, the price of Bitcoin went up. This was very predictable. So what did Tesla do? It bought $1.5 billion of Bitcoin before announcing the news, and then Bitcoin went up and it had an immediate gain. 1
Is George Sherman one of the greatest public-company chief executive officers in American history? He became CEO of GameStop Corp. on April 15, 2019. The stock closed at $8.94 per share that day. On April 19, 2021 — almost exactly two years later — GameStop announced that he will be stepping down by July. The stock closed at $164.37 that day. That’s a 1,739% return over his two-year term, or about 325% annualized. (The S&P 500 index was up 43%, or about 20% a year, over those two years.) GameStop’s market capitalization went from about $900 million to about $11.5 billion; Sherman added about $10.5 billion of shareholder value in two years. 1 
Matt Levine is a columnist for Bloomberg News covering finance and business. Levine has previously been a lawyer, investment banker, law clerk, and has written for a number of newspapers and financial sites. His newsletter, Money Stuff, is one of the most popular on Wall Street with over 150k subscribers.
I don’t know about you, but I’ve been glued to the financial news during the past week. 
Aron Levine is the Head of Consumer Banking & Investments and the Consumer Investments group at Merrill Edge. Levine joined the company through Fleet Financial group in 1993 and has held leadership roles in Commercial Real Estate Banking, Marketing, Corporate Strategy, and Global Wealth Management. He graduated from the University of Rochester with a degree in both Economics and History.