Okay, lets say you had a large sum of money and wanted to make it even larger, so you buy a large amount of a thinly traded penny stock, the price per share skyrockets because of your large purchase, and you sell it either later that day or the next day. Would this work and would it be legal?
2007-05-20 11:25:44 · 5 answers · asked by ? 3 in Business & Finance ➔ Investing
This won't work. At the end of the day, you are the one who drove up the market price in the first place - as broker try to fulfill your large order they resort to buying from the sellers who are selling the stock at increasinly higher price. And when you need to sell your stocks, because of your previous bidding the price you would ask in order to clear a profit would be so out of line that you will have very hard time finding someone willing to take your downside (unless you have identified a severely undervalued stock to start with and is now selling at a fair price). Another exception would be that you are a well-known investor on Wall Street whose actions can sway market sentiment and induce frantic buy/sell actions. Otherwise you won't be able to pull it off.
I don't think it's a legal issue though.
2007-05-20 12:09:08 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Well, just because you buy a lot of stock doesn't mean the price will "skyrocket". If you buy a lot of stock at say a penny a share and people who watch such a thing think that who ever bought that was nuts, the price would likely stay the same.
If indeed, others saw that large buy and purchased the stock causing it to go up, you could then sell it and make a profit.
2007-05-20 18:41:50 · answer #2 · answered by Anonymous · 0⤊ 0⤋
If you try to buy an unusual amount of shares, you won't get them at the price of a few pennies. Your large purchase would be at the higher price. You must remember that there is someone on the other side of this transaction and they will change their price to reflect your demand.
This is, however, not illegal.
2007-05-21 02:05:20 · answer #3 · answered by mba_101 3 · 0⤊ 0⤋
You might be able to affect the price of the stock or you might not. The risk you run is ending up with less money than you started with. Penny stocks are alluring to many traders because they are so inexpensive. They are dangerous, I would advise you not to get involved with trading them.
2007-05-20 18:45:10 · answer #4 · answered by Robert L 7 · 0⤊ 0⤋
No.
Yes, it would be legal.
2007-05-20 19:03:05 · answer #5 · answered by Anonymous · 0⤊ 1⤋