NEW YORK (Reuters) – On the morning of July 11, Paul Pittman was on a corn farm in Western Illinois, unaware his company had taken a devastating hit.
Just before the stock market opened, an anonymous short seller named “Rota Fortunae” posted on Twitter and financial website Seeking Alpha that Pittman’s small real estate investment trust, Farmland Partners Inc, had engaged in dubious transactions and risked “insolvency.”
Posting - Shares - Thousands - Stock - Options
The posting pushed shares down enough to make thousands of previously-purchased stock options profitable, according to a later expert analysis, in turn causing more selling by those on the other side of the trade who committed to buy shares at a higher set price. The accelerating losses were probably compounded by high-frequency trading algorithms activated by price swings and negative keywords, according to that analysis.
“The game was rigged,” Pittman, 56, told Reuters.
Phase - War - Companies - Sellers - Businesses
What followed exemplified a new, ugly phase in a war between companies and activist short sellers, with businesses fighting back against social-media fueled attacks and investors accusing executives of trying to muzzle critics.
Farmland sued Rota Fortunae – Latin for “wheel of fortune” – and other unnamed individuals alleging a “malicious scheme” to profit from the spread of false information and well-timed stock options. The short seller, a Texas-based individual whose identity has been kept secret, sent a statement to Reuters via an attorney that the litigation aimed to “intimidate and choke critical opinion” and that the idea of crashing the stock through “sophisticated trading” was “utter hogwash.” It is all under the watch of the U.S. Securities and Exchange Commission, which has been briefed on the matter.
Stand-off - Debate - Desire - Companies - Concerns
The stand-off reflects a broader debate over how to balance the desire to keep public companies accountable with concerns over market manipulation.
Short selling, said to be as old as stock markets, used to be a low-profile affair where...
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