Short selling of Facebook stock

I recently wrote a post about the practice of short selling. Commenter Gregory in Seattle added some valuable insights (see here and here) on how it works, based on his knowledge as licensed broker.

It turns out that there is a lot of short selling going on for Facebook stock and this article gives more information about how it works and the supply-demand tradeoffs. I was particularly interested in the wide range of premiums that those who own stock charge for lending it out to the short sellers. Although I do not directly trade in stocks, I find this stuff quite fascinating in a kind of geeky way.

The precipitous drop in its stock price following the IPO is raising suspicions of shenanigans in which, as usual, rich and powerful investors benefit at the expense of ordinary ones.

All of these stories suggest that Wall Street is increasingly turning into a giant favor-and-front-running factory, where the big banks and broker-dealers that channel vast streams of crucial non-public information (about the markets generally and their clients specifically) are also trading for their own accounts, and sharing information with a select group of “preferred investors,” who in turn help the TBTF [too big to fail] banks move markets in this or that desired direction by jumping on or off various pigpiles at the right times.

Sooner or later, people are going to clue into the fact that one or two big banks, acting in concert with a choice assortment of unscrupulous “preferred investors,” can at least temporarily prop up or topple just about anything they want, from Greece to Bear Stearns to Lehman Brothers. And if you can move markets and bet on them at the same time, it’s impossible to not make tons of money, which incidentally is made at everyone else’s expense.

Let the investigations and lawsuits commence!


  1. says


    Haaaaaaaaaaaaaaahahahahahahahaha hahahahahahahaha!

    Okay, maybe some posturing from those who want to appear to be leaning left to appease their base, but actual, serious investigations?


  2. unbound says

    I’m with Tabby on this. Investigations aren’t going to happen. Lawsuits aren’t going to happen either since the middle-class that have small amounts of shares don’t have the funds to bring it to court.

  3. Mr Ed says

    So big banks can manipulate markets to profit off them and since Citizens United they can manipulate elections to control legislation and investigation. The circle is complete

  4. Art says

    As long as the political process, getting elected, is primarily about collecting money and only secondarily about issues (running the nation effectively is clearly a tertiary concern) and the main source of money for this is those “preferred investors” there will be little investigation, at best a bit of show trial and whitewash to make the peasant happy if they show up en-mass with torches and pitchforks, but no real reform of this system. The system is working quite well supporting the interests of those who own it.

    This does point out why Obama cannot do much more than make rude noises at the financial class. Doing so he is biting the hand that feeds his political viability. They are not going to stand for much of that.

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