Pump and Dump. Can it work in Nigeria's Investment Market. If it can, is it also illegal as its the case in places like the United States.

*Pump and Dump, its often the strategy used by big money bags to artificially create scarcity of a particular equity, inflate the price of the equity and then sell later for a massive profit.

Igwe OO: Pump and Dump. Can it work in Nigeria's Investment Market. If it can, is it also illegal as its the case in places like the United States.

*Pump and Dump, its often the strategy used by big money bags to artificially create scarcity of a particular equity, inflate the price of the equity and then sell later for a massive profit.

it is illegal in stock exchange almost all over the world but big investors use their influence in doing the illegal. It's not allowed in NSE

stockbull:

it is illegal in stock exchange almost all over the world but big investors use their influence in doing the illegal. It's not allowed in NSE

stockbull:

it is illegal in stock exchange almost all over the world but big investors use their influence in doing the illegal. It's not allowed in NSE

The tone of finality in your comment seems funny, the topic was just for discussion.

Well, you seem vast in this kind of topic. You can do well to enlighten us. Any known legislation against it? Is NSE doing anything to avoid/prevent/stop it? You know well, these big investors can be creative when engaging in acts like 'pump and dump" thereby making it difficult for them to be prosecuted even if there is any existing legislation against it.

Example: Out of the sectors that exists in the NSE, a big investor can target lets say the bank sector. He carefully selects 3 banks (BankA, BankB, BankC) out of all that trades on the bank sector. Now his main target for "pump and dump" is BankB but he will also be investing in BankA and BankC, though not as much as what he invests in BankB. In this case, the equity of BankB increases tremendously, as well as BankA and BankC even so, other equities in banking sector of the NSE increases. Also, if he still has enough money, he can also decided to invest in other related sector like real estate equity which will also be increasing as a result of the run in the banking sector. And before you know it, he dumps them for his money.

In this case, will he be accused of illegal trading when you know he traded of collective stock while "pumping and dumping" is about trading an a single stock.


***Im only bringing this up for discussion and also, to enlighten some of us about equity trading. Also, the discussion is not intended to encourage "pump and dump" or any form of illegal equity trading.

Poorly educated investors are always vulnerable to the pump and dump strategy, but we won't allow that on Nairaland.

Seun: Poorly educated investors are always vulnerable to the pump and dump strategy, but we won't allow that on Nairaland.

Didnt quite understand you but talking about not allowing it, are there measures taken by the NSE to avoid/stop/prevent it? Example, in the USA, investor with or holding over ******** (im not sure of the amount, hence the asterisks) are meant to report their holding at each market day. Also, there are guys called the specialists.

For the Specialists, their work is to buy/sell whatever amount of equity especially when there are no buyers/seller. lets say in a situation of "pump and dumb", the specialist buys the whatever amount of equity that is dumped, warehouse them until there is a buyer. In this case, the specialist prevents the price of the dumped stock from falling hopelessly.

We all know what happens when a particular stock falls hopelessly. There would a mad rush to sell that particular stock, and in the long run, it might force the company into insolvency.

Igwe OO:




The tone of finality in your comment seems funny, the topic was just for discussion.

Well, you seem vast in this kind of topic. You can do well to enlighten us. Any known legislation against it? Is NSE doing anything to avoid/prevent/stop it? You know well, these big investors can be creative when engaging in acts like 'pump and dump" thereby making it difficult for them to be prosecuted even if there is any existing legislation against it.

Example: Out of the sectors that exists in the NSE, a big investor can target lets say the bank sector. He carefully selects 3 banks (BankA, BankB, BankC) out of all that trades on the bank sector. Now his main target for "pump and dump" is BankB but he will also be investing in BankA and BankC, though not as much as what he invests in BankB. In this case, the equity of BankB increases tremendously, as well as BankA and BankC even so, other equities in banking sector of the NSE increases. Also, if he still has enough money, he can also decided to invest in other related sector like real estate equity which will also be increasing as a result of the run in the banking sector. And before you know it, he dumps them for his money.

In this case, will he be accused of illegal trading when you know he traded of collective stock while "pumping and dumping" is about trading an a single stock.


***Im only bringing this up for discussion and also, to enlighten some of us about equity trading. Also, the discussion is not intended to encourage "pump and dump" or any form of illegal equity trading.

keep discussing! Discussion continue!
(<Dangote and african petroleum of the past.> me i kno say anytin o0

it happens in every stock exchange even where it is illegal. the reason why it is not rampant here is that while the market capitalisation of our companies and exchange is small. the coat of capital is high here. in the developed world speculator buy lots of shares on thin margins and are highly leveraged. here people with mean and the wit usually have their funds tied down i their company. few well heeled investors do, but no one will announce it from the roof tops!

Seun: Poorly educated investors are always vulnerable to the pump and dump strategy, but we won't allow that on Nairaland.

Lol........what are you trying to say. Pump and dump still work in all exchanges of the world. It is mainly carried out by big brokerage firms, mutual fund companies, hedge fund companies and institutional investors.

222Martins: Lol........what are you trying to say. Pump and dump still work in all exchanges of the world. It is mainly carried out by big brokerage firms, mutual fund companies, hedge fund companies and institutional investors.

I said investors are vulnerable, which means it does work. However, we won't let people use Nairaland to pump stocks and dump them later.

Kind of like what Dangote did with NASCON a few years ago. Bought into the company and created a lot of buzz around future revamp, causing a scramble for the stock. From less than 30 kobo a share the price soared to around 19 naira. Almost as soon as it got to that threshold, he started to dump the stock.

Seun:
I said investors are vulnerable, which means it does work. However, we won't let people use Nairaland to pump stocks and dump them later.

I doubt if Nairaland is weighty enough to cause a mad rush or dump for a particular stock. The major players that thrive on this pump and dump strategy don't need Nairaland to pull their trick, they have a way to do it and nairaland can't stop it. The only key to escaping being a victim of this game is to be emotionally and financially intelligent. Just my 2cent.