Right now 50's lawyers are telling the SEC that he will never do this again and apologizing profusely in efforts to at least stave off a trading ban and more likely avoid jail.
The death knell for 50 in these tweets are explicit instructions to take a position in the stock, guarantees on returns, the normally low trading volume on the stock, and of course the undisclosed position that 50 had in the stock. It's basically a recipe on how not to promote a stock. Doing your own IR is about as smart as being your own lawyer.
Slinging stock is somewhat similar to slinging rock in that there are a lot of things you can do which will land you in jail. 50 should know better than this.
All that trouble for ~$10M in paper profit. Compare this to the $400M he seems to have netted from his investment in the drinks company Glaceau a few years ago.
That's also one of the worst points about what he did, with his portfolio and status as an accredited investor he's not going to get much leeway for not knowing this was illegal.
I posted this because my first web client was a journalist for the WSJ who went to jail in the 80's for insider trading, doing a similar scheme of buying stock in a company before he wrote a financial column about it. Paper comes out, stock soars and then makes a boatload.
I don't know much about the market, but isn't this essentially the same scheme? And if that was considered insider trading, wouldn't pump & dump on Twitter be just as bad?
Not exactly the same. The journalist may have done research and interviews for his column and thus may have gained insider information. If the journalists publishes the insider information, then it is no longer insider information, and everyone may trade on it. However, if the journalist trades on the insider information before he publishes it, it is still insider information when he trades on it, and that is illegal.
It is not clear whether 50 cent had any insider info. And it did not seem that his tweet published any insider info. However, there are other ways he may get in trouble.
Would it be ok if the journalist buys the stock 10 seconds after the publication / blog post goes live? If not, how long should he wait?
What about somebody who has insider information, publishes it on his personal blog (which is read by very few people), wait a day, then buys some stock?
It's an interesting topic, I'm going to research it a little more, and look into our european laws :)
So I can't make a post about how awesome the company I have stock in is and profit from it? I thought I just had to disclose that I was a owner of that stock to avoid problems.
Generally, no, there are very specific conditions which make such a statement legal.
Statements such as "you will double your money" should always be avoided. Ideally you want a closed-loop system in which people viewing your statement have read to and agreed to the fact that you will be making money from your claims and your statement is marketing material and should not be construed as investment advice. Without such statements and provisions people reading the tweets could easily mistake such statements as investment advice or guarantees in regard to returns. Also, include a safe harbor provision regarding forward looking statements.
Basically, if you're going to talk about stocks or other investments in which you have a stake, consult a lawyer, specifically one who knows the securities law in both the jurisdiction you're speaking, the jurisdictions in which the company is registered and the jurisdiction in which the exchange operates, and for good measure the jurisdictions in which the message will be received.
This is the reason you sign 50 pages of legalese just to open up a trading account. It details exactly how, where, why and when your bank will fuck you over. This is why GS doesn't tweet about their Facebook deal and why 50 will be in jail long before Blankfein.
50 should be smarter than this. 50 cent doing this is the perfect opportunity for a beleaguered SEC to 'crackdown' on securities fraud on a very public figure in a very open and shut manner.
This statement should not be construed as legal advice and you should retain counsel in order to obtain such advice :)
It took a day or two for reality to set in, and 50 Cent (whose real name is Curtis Jackson) began backing off of his cheerleading Monday, The New York Observer reports. He began sending more cautious messages to his followers, saying things like "I own HNHI stock thoughts on it are my opinion. Talk to a financial advisor about it."
There was similar case where someone would verify the academic credentials of CEOs of publicly traded companies in order to discover fraud and misrepresentation.
After discovering a flaw, he would short the company's stock, then go public with the news.
I maybe mistaken, but I believe that was not considered insider trading and his methods were a valid way to invest and make money. I think that is quite a brilliant strategy.
I was following the tweets in real-time. He did mention that he owned stock in the company. He first explained that he invested in TVG (TV Goods, a subsidiary that markets through channels like QVC and HSN), and then a few tweets later explained that the ticker symbol was HNHI.
In response to the auto-playing video advert on that page:
I have nothing wrong with advertising on the web, I'm not against commercialisation of the web. I fully understand that the economics of the web require that we trade easy cheap access to information for small portions of our eyeball-time, but the recent trend towards full-screen interstitial advert pages, large banners hovering over content and autoplaying audio/video adverts, as well as the not-so-recent rise of multi-page articles to inflate CPM impressions is really bad for the web, and to me heralds a return to the bad old days of popups and shoot the monkey adverts from the 90's. We don't need to reward this with pageviews.
I know the alternative many will suggest is adblock, but that option is equally as damaging - it hurts content providers as much as gratuitous advertising hurts content consumers.
So please, disable adblock, and next time you find a page carrying an interesting story but with unacceptable adverts, find another source[1] to share, or downvote/flag it.
edit: I mean: It's a web, a network, in which we exist, and it would be great to reach an equilibrium where people producing content can get paid, and consumers can not get treated like cattle. The alternative is an ever-escalating war between advertisers and advert blockers, which ends up with no-one having a financial incentive to produce great content...
Although as I say that, I realise that the incentive for creating my recently-popular genetic algorithm hello world thing [2] wasn't financial at all. So maybe fuck it just block the damn ads. Hmm. Your thoughts?
There are a great many people who are professional bloggers though, and I think the advertising model really is key to the web - we just need to find a way to make it mutually beneficial (without encouraging click-fraud). Really the ball is in the advertiser's court, but somehow I think they're in it for short-term gains rather than the long-term well-being of the web.
The auto-playinf video advert is actually an auto-playing video report of the 50 cent stock issue. It just happened to have an advert before it, as web video is wont to do.
Hurting themselves by putting up a barrier between eyeballs and their content. I mean it's such a silly short sighted pattern. "I know, we've a really popular village noticeboard which people have come to trust and tell their friends about. Let's put a layer over the noticeboard with adverts that you have to lift up before you can see the actual noticeboard underneath. Soon we'll be rich!". Which they will be, but after 3 months everyone in the village will get wise and stop looking at the noticeboard. And then the noticeboard will be covered in spiderwebs and hornets nests and everyone in the village will have to have their houses fumigated and eventually the noticeboard will be burned down, but the fire will spread and their fumigated houses will also burn down because of the chemicals and so on.
I've seen it happen a hundred times. When will people learn!
It is going to be fun watching the first SEC enforcement action based on tweets. It is also going to be fun watching securities lawyers try to create a valid disclaimer that fits in a tweet.
Shouldn't you be shorting it? If they can't keep him from doing something that stupid, then they haven't coached him right. (Even if they'll rake in some money now, defending him.)
This sounds like insider trading / pump and dump fraud. I don't think a safe harbor statement regarding forward looking statements would even fit in a tweet.
I can feel the down votes, but does anyone else think that insider trading (not saying this necessarily is) should be legalized?
My reasons:
- The information current SEC disclosures release is well known to be a (legal) 2nd set of books that has every interest in painting a rosy picture.
- If gaps in information could be narrowed quickly (i.e. from insider knowledge), stock prices would reflect the realities quicker and best.
- Large stock manipulation can't come from people who don't have money to move markets, but info almost always will come from non-traders. This means they traders would be willing to pay insiders for knowledge to trade on the info - doubtlessly using a contract so the knowledge would be legit.
- If a company isn't treating their employees well (pay, moral, etc.), and has many skeletons in the closet: it would be at risk from insiders trying to take advantage of such a scheme.
Back to 50: BBuffone, below asked what the difference between plugging Vitamin water and stock is - I say that the difference is only an artificial one.
I saw comments in an article here on HN a few days back talking about what 50 did. Some speculated that he could be reported for it and possibly legally challenged, is this correct, has be broken the law?
CNBC does not directly benefit financially from price increases in stocks they cover. In this case, Mr Jackson (50 Cent) has a financial interest in the company and does participate in stock price gains - That is where I see a significant difference.
The article says it's unclear what the company does, but after reading 50 Cent's tweets the other day I looked into it and it seems like they have the marketing rights to 50's new line of headphones: http://sleekby50.com/
Disclosure: I do not own any shares of HNHI
Edit: Looks like he also has a sizable stake in Sleek Audio as well
Shorting a microcap/penny that's involved in a pump and dump is exceedingly risky. Not only have they proven they can manipulate the stock to great heights, but shorts also represent a guaranteed sale even at prices no one else will touch if they can force you to cover.
If you know you're riding the "dump" phase down then you're all good, but the last thing you want to do is be at cross purposes with the manipulators.
Not to mention the fact that it's hard to get short shares of a penny stock as a commercial investor, and once you have them, you face the same low-liquidity problem that everyone has in that market.
Pennies are a market that are slow(few trades) and fast(massive price swings) at the same time. The people that play them seriously wage a war of information, and sit around waiting for every tick all day, posting on forums, trying to discern the actors and their intentions. And it's frighteningly easy to deceive oneself into following pumper's tips, like those 50 gave. It just has to be heard from someone you trust, at a vulnerable moment.
The death knell for 50 in these tweets are explicit instructions to take a position in the stock, guarantees on returns, the normally low trading volume on the stock, and of course the undisclosed position that 50 had in the stock. It's basically a recipe on how not to promote a stock. Doing your own IR is about as smart as being your own lawyer.
Slinging stock is somewhat similar to slinging rock in that there are a lot of things you can do which will land you in jail. 50 should know better than this.