'Spivs' back on the stock market

A feature of the summer in the City has been the orchestrated outrage against short sellers - people who sell shares they do not own in the hope of making a profit when they buy them back later at a cheaper price. It is alleged - shock horror - that some of them have deliberately spread damaging rumours to bring about the fall in prices they need.

I am sure it happens. Certainly it always used to. Indeed, long before the internet came along and allowed people to disseminate gossip worldwide and leave no fingerprints, 'spivs' as we called them, would use the stock market columns of the Evening Standard to seek a wider audience for their thoughts.

But for every damaging rumour there were four or five times as many designed to push shares up, and that is the still the case today. What is quite irrational, however, is that although this is as much an attempt at market manipulation as trying to force prices down, no-one seems to get hot under the collar about it.

It is surely time they did. It is now almost de rigueur that whenever a company has a disappointing week, some flimsy story will be floated - and normally the intermediary is a PR person - in the Sunday papers. This will hint at something designed to make the shares go higher - or at least stop them falling.

The favourite used to be that private equity buyers were looking at the company with a view to a bid. A second was that the company was thinking of breaking itself up. A third was that 'the search was on' for some new non-executive directors or even a new boss. Sometimes, of course, the stories turn out to be true. But more often than not nothing comes of them. By then, though, they have served their purpose.

The other tactic we see a lot of at the moment is to leak an exaggerated version of how bad things will be so that when things turn out not as bad as expected it will perversely be seen as good news. That is what lies behind all those stories over the past couple of weekends of huge losses among the banks. Writing off £1bn is a positive result if everyone has been conditioned to expect £2bn.

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