Giving Manipulators Short Shrift

Few things annoy a company more than when a short-seller starts bad-mouthing the company to drive down its share price and the company can do little about it.  Now, as a result of a recent SEC enforcement action, there may be some recourse against such troublesome activity.  On September 12, 2018, the SEC filed an enforcement action against a short-seller, Lemelson Capital Management LLC, and its founder alleging that they engaged in a fraudulent “short-and-distort” scheme by spreading false information about a biotech company in order to profit from the decline in the company’s share price (https://www.sec.gov/news/press-release/2018-190).

The SEC was careful to note that short-sellers are free to express their opinions about particular companies but are not entitled to disseminate false statements to support their short-selling activity.  Thus, if a company believes that a short-seller is in fact spreading false information, it may now have an avenue, through use of the SEC, to have recourse.

The post Giving Manipulators Short Shrift appeared first on Capital Markets.