"On Monday he wrote about CMKM Diamonds, a little-known penny stock that blamed its precipitous decline on naked short-selling. Its shareholders bought the explanation wholesale, and some even went to New York and Washington to stage loony protests against the evils of naked short-selling. Turns out it wasn't naked shorts after all. It was the company's dishonest management, which is currently being sued by new management for fraud and "looting" the company. They sold over $200 million in stock to the public, but almost none of it went to the company."
Bookmark this blog: Gary Weiss
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May 04, 2007: 11:33 AM
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Bookmark this blog: Gary Weiss
Posted May 3rd 2007 8:35PM by Zac Bissonnette
Filed under: Management, Law, Blogs, Scandals, Columns
If you enjoy following the nakedshort-selling "scandal," you absolutely must bookmark Gary Weiss's blog. He tracks the ongoing shenanigans surrounding Overstock.com Inc. (NASDAQ: OSTK), which he referred to this morning as a "fascinating slow-mo corporate train wreck." You can also read his commentary on lesser-known but still interesting market scandals.
On Monday he wrote about CMKM Diamonds, a little-known penny stock that blamed its precipitous decline on naked short-selling. Its shareholders bought the explanation wholesale, and some even went to New York and Washington to stage loony protests against the evils of naked short-selling. Turns out it wasn't naked shorts after all. It was the company's dishonest management, which is currently being sued by new management for fraud and "looting" the company. They sold over $200 million in stock to the public, but almost none of it went to the company.
This is a great example of the tactic of diversion in action. Corporate criminals will often toss red herrings to divert the public's attention from their own misdeeds and poor management. Blaming naked short-selling seems to be the diversionary tactic du jour, and investors should probably head for the hills anytime a company complains about it. |
