SEC Opens Bear Stearns Stock Manipulation Inquiry

Oh, this will settle things down quickly — not. The SEC has opened an inquiry into possible manipulation of Bear Stears stock by hedge-fund short-sellers spreading rumors about the company’s solvency.

The Securities and Exchange Commission probe is focusing on whether hedge funds or other investors bet on a drop in the company’s shares while disseminating rumors that the New York- based firm was nearing collapse, said the people, who declined to be identified because the inquiry isn’t public. The New York Stock Exchange’s regulatory arm is also involved in the investigation, the people said.

Speculation about a cash shortage spurred customers and lenders to pull money from Bear Stearns last week, driving the shares down 57 percent between March 7 and March 14. Two days later, the fifth-largest U.S. securities firm was acquired by JPMorgan Chase & Co. for $2 a share. The company’s decline coincided with a surge in investor bets that the stock price would plunge. The SEC’s probe is unusual because most of the regulator’s stock-manipulation cases focus on penny stocks.

[via Bloomberg]

Related posts:

  1. Bear Stearns: Real Estate — Its Own — Holds Key to Sale
  2. Explaining the Bear Stearns $7 Price
  3. Sequoia Does Stealth Distribution of Google Stock
  4. Bear Stearns: $270M. What an Ending.
  5. Quote du Jour on Bear Stearns

Comments

  1. “The SEC’s probe is unusual because most of the regulator’s stock-manipulation cases focus on penny stocks.”
    Just goes to show you that penny stocks are not the bad guys and don’t deserve the bad rap they get.
    Rather, the bad guys are stock manipulators who take advantage of the masses for their own benefit. Stock be damned.
    Regards,
    George

  2. mark says:

    well its about time.
    the rumor mill on wallstreet is so entreched they report on it all the time on CNBC. where has the SEC been? this is unusual? it happens every day. shorts make up some fake info, get it on the news, the stock tanks, they make a fast profit.
    come on. where has the SEC been?? investigating penny stocks while the big board players have been reeking havoc for years?? don’t they watch the news??

  3. Mark…great point. Yes, CNBC is media and their job is to break stories – but it’s not like they are out in disguises getting the scoops. They just sit at their desk waiting for the phone to ring. Who is calling them and why are they calling them?
    It’s a perfect system when you think about it because CNBC never has to reveal their sources. Why try and spread rumors in elevators when CNBC will broadcast them to the entire world for you?
    Regards,
    George

  4. David says:

    should be easy to track whoever bought the Mar deep out-of-money puts