Market Abuse - Ramping and De-ramping

[This post has been edited and a new link demonstrating Market Abuse from the Wall Street Journal added to it Thursday 12th July 2007]

Have you been on a shareholders bulletin board (BB) or forum recently where something looks fishy?

Well over on the iii BB for Stanelco, a shareholder has taken things into his own hands and reported the company to the LSE for what he/she perceives to have been the company's deliberate attempts to ramp their position in the market by sending out overly positive statements whilst in reality everything wasn't as rosy in their garden after all as was evidenced by the failure of their Greenseal Trials with Asda.

Prior to their admission of the trial failure, all company statements had said the trials were going well. So what might the company have been guilty of (allegedly)? Well maybe they were guilty of suppressing the negative price sensitive news that should maybe have been issued at a much earlier stage.

A company has an obligation to their shareholders to issue ALL price sensitive news within a timely manner, whether that be in the Positive or the Negative as this is what shareholders use to make financial decisions on their stakes within the company ie their shareholding levels.

It is understandable to a degree that no company wants to have to issue bad news as they want the shareprice to go up not down obviously. Keeping the price heading up makes it easier for them to get institutions on board and to secure funding when required. Negative news hinders this.

So what is Ramping?

Well ramping can take many forms, from a company not issuing the negative news, a shareholder who has lost a lot of money in the past and has maybe bought in at a new low and now wants to make back his losses, a company owner overstating the future potential of the company, to even someone circulating rumours of a take over bid on it's way.

A ramper might use a BB to constantly espouse the future potential revenue of the company even if unfounded, put ridiculous valuations on a company for possible take over bids and post so often as to drown out other peoples opinions. They might also pick on other posters and mis-represent what they are saying if they take a even a slightly different view to them or an obvious opposing position. This can even go so far as to go offline and become a personal attack if they have access to your email address.

What is De-ramping - and who does it benefit?

This, also, can take different forms. Perhaps a shareholder has gone short on a share, they obviously then need a decline in the shareprice to make a profit, so they will go onto BB's and say anything they can to persuade others that the company is going to fail or a particular product is going to fail. Directors who want to perform a management buyout, might similarly suppress the positives about how the company or products are progressing to a degree where they are not fully informing the market of 'positive' price sensitive news, for their own ends.

A de-ramper can and will also use all of the same tactics as the ramper when it comes to BB's and making sure their message is the only one heard.


So what is the difference between the ordinary shareholder and the ramper or de-ramper?

Well the ordinary shareholder, while they probably enthuse about any company they have bought shares in, they will also take on board the possible negatives and be happy to have both sides of any argument openly aired so that they can make an informed decision. They might not like to hear the negatives or have their excitement quelled a bit, however, they will listen and accept that no company or product market is buoyant ALL the time and they will want to hear clear arguments from both sides of the fence and from that, they will then decide to continue to hold a share or sell up and move on. At least they will have had all the information available to them to do this.

Now lets face it, we all get a bit excited when we hear a rumour and the old adage goes, Buy on Rumour Sell on Fact, the market operates a lot on rumours, but I suppose the important thing to think about when you hear a rumour is. Where did the rumour start, has the person posting the rumour backed it up with any research and/or links to that research. If it has just appeared completely out of the blue and has absolutely no basis in fact, then bide your time and wait for confirmation or you could just be supporting a shorters dream situation, or helping someone who's lost a lot of money to sell into a rise created by the rumour. They will then be off, while you are left sitting with the shares and the price drifting down again.


Related Articles
thisismoney.co.uk published an article entitled Avoid the Pump And Dump last year, warning people about email and BB campaigns to ramp or de-ramp shares.

And what happens if someone is found out.......
'City Slicker' Hipwell Jailed
Livedoor founder arrested
'Lie for me' asked Morgan
High-risk journey to the unknown
Wall street Journal

Enjoy BB's they can be a lot of fun and you can meet a lot of very nice, knowledgeable, witty, trustworthy people on there. But be wary, you can also become a gullible victim of someone elses game very easily, but be careful of getting dragged into something that could see you entrapped in an illegal situation.

If it looks fishy and smells fishy, then take care, we all know what bad fish does to us. :o)

Oh and by the way, I hold Stanelco shares at a loss, but I'm not afraid to hide the negatives because of that loss....LOL....the truth is the truth.

Chaco Resources SAG Meeting

A group of four shareholders were extended the courtesy of a meeting with the company's new advisors, Blue Oar Securities PLC. The meeting took place at their premises in London EC2 on Tuesday 7 May 2007.

The purpose of the meeting was to collectively put forward, on behalf of private investors/shareholders, a number of key concerns all, it seems, contributing to negative sentiment.

We wanted to make it clear to them that as a single unit we represented, without any effort, almost 15% of the shareholding and make them aware that we existed and could stand up and be counted should it be necessary in the future. More specifically, we wanted to discuss some concerns about the level of communication of late, discuss the recent arrival (and departure) of various Board Members (including Corporate Governance issues) and obtain a better understanding of the short and longer term strategy.

The representatives from Blue Oar afforded us every courtesy and responded as best they could to our concerns. They confirmed that the points we raised would be conveyed to the Chairman, Giles Clarke.

I am slightly limited as to what I can disseminate here as we were given sight of their recently completed Company Report that was intended for their Institutional Clients. It was used purely as a discussion tool during the meeting and it was agreed that this would not be forwarded to any third party or discussed on bulletin boards.

The Shareholders group have to honour this if we stand a chance of retaining credibility or meeting with Chaco's representatives, or the Company, again in the future.

It was felt by our group that the meeting went very well and all came away with a sense of optimism.

Needless to say, should some of our concerns not be addressed, they will be put forward in much stronger terms at the next AGM, where the Chairman will not be able to hide behind others.

The Alea prospect is now becoming interesting. It is clearly the Company's priority in the short term and there is much hope that the proven reserves can realise the anticipated quantities to make it a profitable play. It is my understanding also that the civil works needed to access the drilling site is well on the way to completion so we may be see some useful communication from the Company in due course.

Finally, should any existing shareholder, certified or beneficial, wish to join the group and make our position even stronger, please do not hesitate to email the coordinator Stewart at simstew@btinternet.com with your name and shareholding.

Beau - Gareth

Shareholder Action Groups

From what used to be a pretty closed shop in the financial industry ie companies had carte blanche to trample the small investor as 'he' didn't have any force within the shareholding, the Internet and 'bulletin boards' seem to have changed that scenario forever.

You used to buy shares by contacting a broker getting advice or telling him what you wanted to buy or sell and he then did the transaction for you. Perhaps the system has bitten itself in the foot now by opening up on the Internet and giving the small (I used that advisedly as many are quite large) investors direct access to buying and selling shares.

By having online systems and as said before 'bulletin boards' on a lot of online broker sites, small investors can now communicate with each other and join forces and become a force to be reckoned with by agreement to use their joint holdings as a way to change a company's attitude to them.

Shareholder Action Groups seem to be springing up all over the place now. Tadpole formed one to try to defend the company against the obvious attempt to take it over by Steig Westerberg and John Dilts. Other groups of shareholders have formed them to try to get companies to take the shareholders views into account for many reasons and whether at the end of the day they achieve their goal or not, they tell the management that they are being watched and watched closely at that.

I have been approached by 2 SAG's to give them a platform to get information out to other shareholders about issues they are dealing with and I am more than happy for that platform to be here.

SAG's - Chaco Resources and World Television Group will both be posting information on here in the next few days. Let the force of the Internet be a friend to the small investor. Make sure that they get an audience. If you know anyone else who either holds any of these shares or is just another investor who might know someone, please send them an email link to the site or use bulletin boards to let them know where to find out what is happening, but do not just spam BB's with this though.

I'm not saying that all SAG's are set up for the right purpose, but most probably are - Help each other here please, you might need something like this yourself one day. If you are a TAD holder then you probably were involved in one.

To join the WTV Action Group visit http://wtvaction.org/default.aspx

Chaco Resources - What's up!

Rather than just post a lot of links to information that most Chaco holders already know about, having talked to a couple of Chaco shareholders I am now of the opinion that someone better than me can fill you in on the current story.

I will post some information obvioulsy so that non holders can get the background information, but I have sent an 'author invitation' out so that he can blog here directly for you.

Apparently just like Tadpole, the shareholders of Chaco have felt the need to create an Action Group to elicit information from the company as they feel they are being kept in the dark about important issues. I think we are going to see a lot more of this type of thing in the future with so many small holders wanting to take an active role in their investments. This group are meeting on Thursday, so I have asked my guest blogger to do a pre meeting blog and if the others agree to it a post meeting blog to update you on whats at hand.

In the past companies had a barrier between them and the investor due to the fact that people dealt via the telephone with a broker and took their advice on what they should and shouldn't buy. With the internet dealing services available these days, the small investor is now much more hands on in their choice of investment, being able to research it and they want to hold the management of the companies accountable in a way never before seen.

Power to the people I say!

Chaco Resources CHP.L

I've had a request by Nildes to do a piece covering Chaco Resources.

Guilty as charged m'lord. This is a share I do hold some of but more because I got the tip from someone else rather than because I'd done the research and in fact I never have really researched it even though it has not performed as I'd hoped. I just keep getting told....hold them, they will come good.....lol (shivers of TAD run down my back when I hear that - but then TAD is coming good, so hope for everything if you wait long enough isn't there)

Right so this is where you lot come in - if you are a Chaco expert, pin your colours to the mast and help me out here. Send all info to the email address above if you can.

I'll do some research on this tonight or tomorrow morning if I get the opportunity and we'll see if we can get a good summary of who, what, where, when and why for this one.