The SEC Wants Investors to Stop Buying the Wrong Zoom Stock – Nasdaq | Hacker News Reader

The SEC Wants Investors to Stop Buying the Wrong Zoom Stock – Nasdaq

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50 pointscmehdy25 comments

Fun fact: Buddy of mine wanted to buy Petrobras, a Brazilian oil company. By mistake he bought a company with a similar name, that was basically an electricity provider in Argentina. In the end it ended up a better investment. :-)

If you are n't paying attention then you will pay ignorant tax by buying the wrong ticker. Although, in short term, it might make you good ROI.

Matt Levine had a fun observation about the whole mess ( https://www.bloomberg.com/opinion/articles/2020-03-26/nobody... )

> I hope you didn’t get too clever about this. For instance, if you noticed that everyone was buying the wrong Zoom and decided to profit from their stupidity by selling ZOOM short, then (1) you have done poorly (ZOOM is up almost 900% year to date) and (2) now you might not be able to close out your short.

You usually have to post margin daily so you might have been priced out by now

This also happened with a piece of shit OTC Facebook app developer called SNAP Interactive when Snapchat was going IPO. I met their CEO at a conference in NYC, and he literally had business cards printed out touting how high their market cap got during this and their subsequent message board pumping.

Other common examples are COKE (who don’t make Coca Cola) and HP (who don’t make computers).

In some Asian markets they use numbers for tickets (and some people invest based on superstitions about those numbers)

Your rational efficient market at work. Good grief.

Rational/efficient markets don't mean no irrational players. It just means that those players get punished for their irrationality, which is exactly what happened here. If anything efficient markets hypothesis is based on the fact that low/bad information is penalized which in turn makes markets more efficient ;)

Technically everyone can be rational if their utility curve is optimized by buying the wrong zoom

Yep! I think Matt Levine talked about that recently. Though to be honest, speculating on an almost "fake" stock isn't exactly rational (from the perspective of an individual market participant) because there is no way to even try to optimize the utility curve.

Unless you find it fun to gamble. Risk seeking utility curve

Ah! But we already have SPY options if you want your fix of purely degenerate gambling. I won't disagree that it's super fun! ;)

Some of my professors would include tesla in that list haha. To each their own!

I don't know. The purported rational market (which I don't really believe in) would have corrected this problem by selling shorts, among other things. However such trading IRL would have turned out to be a really bad idea because of just what has happened. So it's plausible that knowledge of the non-freeness of the market prevented an efficient price from being reached for this security.

Would it have been rational to be short though? If people confused it for the real thing before you shorted the stock, why would one assume people won't keep making that mistake? It is obvious that anyone who buys the wrong stock because of the ticker has low or no information about the stock so what could make that change? So even if the current investors realize their mistake, there's no reason to believe more badly informed played won't keep buying.

Shorting a stock is only profitable if it has at least some informed shareholders that will react rationally when confronted with negative changes by selling their stakes. On the other hand, shorting a stock inherently full of irrational players and speculators trying to profit from them is contradictory, because you are betting on (deeply) irrational players being rational.

The way this usually works is someone buys a really large short position at a good price and then publicizes true information that convinces at least some long traders to sell their positions.

There's also some question to me how much liquidity there is here. Their volume isn't tiny (at least according to Yahoo Finance) but I don't actually know how many shares are trading hands. There might not be a deep enough book to make it worth making the trades.

Yep but that's my point! Odds are, if you can't even bother checking if you are buying the right stock beyond looking at the ticker, you won't know about a short seller publicly announcing it's short position.

Is it really up to the SEC to do this? It sets a precedent. Now will they be liable if they don't warn people about other companies with similar names? With 3 and 4 letter tickers, many companies are 1 letter off.

ZOOM has not filled anything to the SEC for 5 years now. It's a dead chinese zombie shell corporation so this is more akin to keeping the stock exchanges clean of junk. Especially since that junk only exists to harm.

COKE is routinely mistaken for Coca Cola, but the SEC doesn't intervene because COKE is a real operating company. So I think this is not a sign of overreach from the SEC.

COKE is not only a real thing, they’re also involved in bottling Coca Cola, so while they’re not financially the same company, they are inextricably related.

Trading can be suspended to protect investors to give everybody time to cool off. I don't think suspending one defunct company for large volume of erroneus trades is much different.

Robinhood is still advertising COKE, which is not the Coca-Cola Co.

Why do they call them investors? People who haven't even briefly read financial filings for the company they are going to buy? They are called speculators, not investors.

This seems a bit silly - if people can’t make sure they’re buying the right stock, maybe they should bear the consequences of that. Caveat emptor.

Why is nasdaq.com advertising for Motley Fool?

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