Rotten rumors of impossible Apple stock split helps fund manager clear profits

Posted:
in AAPL Investors edited January 2014
Apple shares reversed intraday losses and gained slightly after hedge fund manager Doug Kass tweeted a rumor of Apple announcing a stock split at tomorrow's shareholder meeting. However, Kass subsequently sold on the run up and then disavowed the rumor as impossible and unlikely to actually happen.

High above the Alps my Gnome is hearing a rumor that Apple will announce a stock split at tomorrow's shareholder meeting.$AAPL

? Douglas Kass (@DougKass)


Kass' tweet of "hearing a rumor that Apple will announce a stock split at tomorrow's shareholder meeting" appeared to turn around losses the stock had incurred earlier in the day, followed by shares rising just over 1 percent afterward. Apple's shares ended the day at $448.97, up just under 1.4 percent for the day.

AAPL Feb 26 2013


However, after being credited with the change in prices, Kass subsequently responded by saying, "If you think one person can move Apple on a rumor you are in the wrong business."

Kass then announced via Twitter that due to the rise in Apple's stock, "Prudence dictates that I sell off some of this outsized position." He later announced he was "paring back" his Apple holdings because "the company would require a shareholder vote to split the stock."

He added, "the [stock split] rumor seems to be baseless based on current share authorization," as Apple's articles of incorporation only allow a 2-1 stock split. "Which is no big deal," he added, "[Apple] must seek auth. for more." Kass meant that for Apple to split shares greater than 2-1, it would have to gain authorization through a vote by shareholders.

Say it, swing it, profit

The Street staff


Kass (second from left) also writes for The Street, founded by Jim Cramer (second from right). Six years ago, Cramer outlined how hedge fund managers spew false information to create either panic and excitement that could be used to drive stock prices up or down, allowing for easy profits for stock manipulators who can effectively seed false information.

"You can?t foment,? Cramer said in a video interview appearing on The Street website. ?That?s a violation. You can?t create yourself an impression that a stock is down. But you do it anyway because the SEC doesn?t understand it. That?s the only sense that I would say that it is illegal. But a hedge fund that is not up a lot really has to do a lot now to save itself."This is actually blatantly illegal, but when you have six days and your company may be in doubt because you are down, I think it is really important to foment."

"This is actually blatantly illegal,? he added, ?but when you have six days and your company may be in doubt because you are down, I think it is really important to foment. If I were one of these guys, foment an impression that Research In Motion isn?t any good, because Research In Motion is the key today," he said, speaking in 2007.

?It might cost me $15 to $20 million to knock RIM down, but it would be fabulous because it would beleaguer all the moron longs [investing in RIM?s success].? After creating a loss by fomenting a false outlook with bad news, manipulators can then take advantage of their own downswing in share price and profit.

?It?s important to get people talking about it as if something is wrong with RIM. Then you would call the [Wall Street] Journal and talk the bozo reporter on Research in Motion and you would feed that Palm has got a killer it is going to give. These are the things that you must do on a day like today. And if you are not doing it, maybe you shouldn?t be in the game.?

Cramer next discussed how Apple was "an ideal short" because hedge fund managers know when they lie about Apple, "the people who write about Apple want that story. And you can claim that it is credible because you spoke to someone at Apple, because Apple isn?t in [a position to comment on unannounced products]."

"What?s important when you?re in that hedge fund mode is to not do anything remotely truthful."Cramer added, ?What?s important when you?re in that hedge fund mode is to not do anything remotely truthful. Because the truth is so against your view that it?s important to create a new truth, to develop a fiction. The fiction is developed by almost anybody who is down by 2% or up 6%. You can?t take any chances, you can?t have the market up any more than it is if you?re up 6.?

Asked by his interviewer about the fundamentals of the market (the actual performance of companies) compared to the mechanics of the market (the artificial actions taken by traders in a game of buying and selling shares), Cramer dismissed the idea saying, ?The mechanics are much more important than fundamentals."The great thing about the market is that it has nothing to do with the actual stocks. Maybe two weeks from now the buyers will come to their senses and realize that everything they heard was a lie."

"Who cares about the fundamentals?" Cramer asked. "Research in Motion just blew out the quarter. But look what people can do. That?s a fabulous thing. The great thing about the market is that it has nothing to do with the actual stocks. Maybe two weeks from now the buyers will come to their senses and realize that everything they heard was a lie."

Cramer then concluded, "I think it?s important for people to realize that the way that the market really works is to have that nexus of: hit the brokerage houses with a series of orders that can push it down, the leak it to the press, and then get it on CNBC; that?s also very important. And then you?ll have a vicious cycle down. It?s a pretty good game. It can be played for a percent or two."

Share splits back on the table at Apple?

While much of the conversation in anticipation of Apple's shareholder meeting scheduled for tomorrow morning has centered upon a proposal by Greenlight Capital's David Einhorn to issue preferred stock tied to increased dividends, the chatter about stock splits reignited a subject that's been in discussion for some time.

Unlike dividends, which would distribute a fixed portion of Apple's cash to shareholders over time, a stock split wouldn't do anything to directly increase the value of holding Apple shares. However, some observers have hoped a share split would make owning Apple shares easier for smaller investors.

A stock split, which would simply divide each existing share in half (or into some other set fraction) is seen as potentially making the shares seem more affordable or simply dispel irrational feelings that the current share price is "too high."

Apple last issued a 2 for 1 share split on February 28, 2005; it announced similar splits in the summer of 2000 and the summer of 1987.

At last year's shareholder meeting, members of Apple's executive team said they had discussed a stock split along with dividend plans and a share buyback program. The company subsequently announced a 4 year dividend and buyback plan, but did not announce any plans to split shares.

Chief executive Tim Cook noted that one downside to splitting shares is that it could increase fees paid by some parties to execute trades. Overall, however, any effects would largely be symbolic rather than having any real impact on the value of Apple's shares.

At the same time, the idea promoting a share split is that it would induce a new wave of buyers, hopefully propelling the share price upward. After hitting highs above $700 last fall, Apple's shares have tumbled down into the low end of the $400 range, essentially vaporizing all the gains Apple earned since late 2011.

This occured despite 2012 being the company's most productive and profitable year, generating record new revenues and earnings. Apple now takes in the most profits of any personal computer maker, earns the vast majority of the profits of the entire mobile industry, and accounted for the largest segment (one fifth) of consumer electronics in the US.
«134

Comments

  • Reply 1 of 70


    Whew...what is his trip? He should be investigated by the SEC...

  • Reply 2 of 70
    Let the anti-Wall Street whining begin. It's all a game folks, either learn to play or get played. Your choice. It has nothing to do with Apple or any other specific company.
  • Reply 3 of 70
    nchianchia Posts: 121member
    Doesn't really pay to invest in the share market for the average investor, does it?
  • Reply 4 of 70
    rob53rob53 Posts: 1,950member
    This is why the world is in such a mess. All the blatant false information and stock market manipulation. Is lying and cheating the only way people can succeed? The reason Apple keeps its money is so it doesn't have to rely on the idiots in the stock market causing it to go bankrupt. I'd empty the prisons on murderers and put in people like Cramer and Kass. Their actions affect more people in a negative manner than murders and common thieves do.
  • Reply 5 of 70
    slurpyslurpy Posts: 5,076member


    DIsgusting. And scum like this guy won't see a shred of accountability for their dishonest, damaging actions. It's only everyone else that gets fucked. 

  • Reply 6 of 70

    Quote:

    Originally Posted by tfun50 View Post


    ...what is his trip?



     


    He is a professional lying scumbag. No ethics, no remorse.

  • Reply 8 of 70
    r00fusr00fus Posts: 245member
    @msuberly,

    Your blithe defense of this kind of purely self-serving (and likely illegal) wall st. behavior makes me wonder if you are either an idiot or a wall st. sycophant (or both).

    Although I think it's possible you're just the kind of "persona" that money can buy:
    http://www.dailykos.com/story/2011/02/16/945768/-UPDATED-The-HB-Gary-Email-That-Should-Concern-Us-All

  • Reply 9 of 70
    jragostajragosta Posts: 10,473member
    That guy needs to be in jail. I hope the SEC goes after him.

    Meanwhile, Apple could just announce a 2:1 split tomorrow and tell people that they're going to request a greater split in the next shareholder meeting.
  • Reply 10 of 70
    apple ][apple ][ Posts: 8,360member


    What a bunch of BS. Certain people belong in jail, where it's not easy to access twitter.


     


    "If you think one person can move Apple on a rumor you are in the wrong business."


     


    I actually do think that one person or one idiotic rumor can move Apple. The way it goes is that a dumb rumor gets invented and fabricated by a single source, and then you have every single Apple related site and various news sites on the internet spreading that very same rumor. And it doesn't even matter if it's true or not, the BS spreads like wildfire and apparently, a lot of stupid people believe it. All of the Apple related sites basically report the same news and BS rumors.


     


    How many different sites have written about this Kass rumor today? A lot, that's how many.


     


    And why would he have typed that first rumor, if later on, he dismisses it and says that it's pretty much impossible?


  • Reply 11 of 70
    gazoobeegazoobee Posts: 3,754member

    Quote:


    Originally Posted by AppleInsider View Post



    Apple shares reversed intraday losses and gained slightly after hedge fund manager Doug Kass tweeted a rumor of Apple announcing a stock split at tomorrow's shareholder meeting. However, Kass subsequently sold on the run up and then disavowed the rumor as impossible and unlikely to actually happen.


    ...


     



     


    And yet he's not in jail.  


     


    And Jim Cramer his old boss has been doing this for years and he is also not in jail.  


     


    Clear cut stock manipulation ... nothing happens.  


    And you people wonder why no one trusts the USA anymore.  

  • Reply 12 of 70


    I am surprised such scum like him is not put away! 


     


    It is even disgusting to read that Cramer mentioning that he doesn't believe in fundamentals. He was the one at one point pumping APPL and when things go south he starts speaking a different language! I think most of the guys on CNBC and The Street and liars, cheaters and with out ethics - They are just a notch above scumbags!

  • Reply 13 of 70
    Based only on his diatribe about lies, deceits and "fomenting", this guy needs more than a slap on the wrist. He's actually advocating the kind of dishonesty the SEC is there to regulate against and prevent, AND then acting accordingly.

    This was a blatant, almost perverse manipulation. Someone credible gives the sense that he has an inside "little bird told me" scoop, and he KNOWS it most certainly will influence the price movement%u2026 and then sells on the uptick? Blatant.

    I also think this could be a bit of 'testing the waters'. If the SEC does nothing at all, watch for a lot more of it. Especially coming from this guy if he isn't fined or censured for this despicable little "foment" of his...
  • Reply 14 of 70
    joshajosha Posts: 901member

    Quote:

    Originally Posted by broadbean View Post



    Doesn't really pay to invest in the share market for the average investor, does it?




    It does pay to invest  if you are a contrarian investor and take advantage of the misinformation in the press.  image

  • Reply 15 of 70
    joshajosha Posts: 901member

    Quote:

    Originally Posted by jragosta View Post



    That guy needs to be in jail. I hope the SEC goes after him.



    Meanwhile, Apple could just announce a 2:1 split tomorrow and tell people that they're going to request a greater split in the next shareholder meeting.


    Or Apple could just announce 2:1 splits for several quarters in a row.

  • Reply 16 of 70


    A stock split doesn't do anything to the value of your holding at the moment it occurs, but wouldn't it have a multiplicative effect on the gains (or losses) based on the factor of the split?  If AAPL were to effect a 2-for-1, and the stock went up five points the next day, you just doubled the gains you'd have seen without the split, correct?  And would it be right to speculate that the trading day after a split goes into effect would see a big jump in the price of a stock like AAPL?

  • Reply 17 of 70


    How can this be legal? Isn't this what the SEC is supposed to be protecting against. If it's this easy to manipulate without any consequences, welcome to the wild west.

  • Reply 18 of 70


    Doug Kass - notorious manipulator, shameless liar, best ignored - oft seen bashing Steve Jobs for one thing or another back in the day.

  • Reply 19 of 70

    Quote:

    Originally Posted by r00fus View Post



    @msuberly,



    Your blithe defense of this kind of purely self-serving (and likely illegal) wall st. behavior makes me wonder if you are either an idiot or a wall st. sycophant (or both).



    Although I think it's possible you're just the kind of "persona" that money can buy:

    http://www.dailykos.com/story/2011/02/16/945768/-UPDATED-The-HB-Gary-Email-That-Should-Concern-Us-All

     


     


    I read the linked article. Holy crap, man…. there's something that should simply be illegal. Automated mass manipulation of online social environments for political/financial gain? It takes the concept of propaganda to a whole new level...


     


    I can understand creating personas for intelligence gathering, for security… that makes sense. But like drones, their use must be limited and highly contextual… this becomes a free for all, highly exploitable, and unless it's regulated, too easy to blur the lines of ethical and even criminal behavior...


     


    Thanks for the link though, and I agree, @msuberly contrariness could indeed speak to one of those faux personas...

  • Reply 20 of 70

    Quote:

    Originally Posted by tfun50 View Post


    Whew...what is his trip? He should be investigated by the SEC...



     


    Or at least his bosses cause that looked like a rather clear attempt to pump up the price and then short it. Both of which are money making moves.


     


    even if he's cleared legally it doesn't make him look so good and reputation can be just as damaging

Sign In or Register to comment.