Interesting article linked about drop box going public next year. I wonder if they were waiting for the public to forget about Box, a competitor who went public and whose stock has, well, under performed since.

https://www.bloomberg.com/news/articles/2016-08-15/dropbox-s...

As to Neuromama, some people speculated yesterday that the owners were trying to make money via a short squeeze. I can't say this is wrong but I'd be surprised if that was their game.

For one, any decent short seller will lock in their borrow before they short. This means that the owner can't call back their shares for the agreed upon duration.

Secondly there haven't really been any large transactions in the stock. So maybe there is a short seller out there holding 1000 shares short but that's not really going to make the owners any real money.

Thirdly, the short interest is very small, not even a day's worth of liquidity, which says something when the stock hardly trades at all.

Fourthly, and perhaps this is the least compelling point, its an OTC stock. ie its a scummy stock, many brokerages wont' let the average person short this stock and most professionals won't touch it as the downside from shorting just isn't there. I mean every short seller knows that a stock can only go down to zero but in the short term almost any stock can shoot up.

See KBIO for horror stories of what can happen when people who shouldn't be shorting decide to short stocks, hint Martin Shkreli is involved.

Nice point about prosecutorial discretion in insider trading. Some advice (life advice, not legal advice): if you're doing something questionably legal, don't sound like a criminal while doing it. The recent HSBC currency exchange prosecutions are a good example. That never would have gotten prosecuted if the executives' emails didn't make it seem like they thought they were doing something shady.

See also: https://news.ycombinator.com/item?id=12294193

Matt Levine is my favorite writer on Bloomberg View!

Do people involved in these rackets REALLY think they won't get caught in the end? I don't get it.

Part of me thinks they plan to make "enough" (however many zeros that happens to be) and then just disappear, and the ones we hear about are the ones who had too many zeros in their definition of "enough" or whose actual definition of "enough" is really "more."

A lot of the setups are so blatant though, that I think they are in it for the live fast, die young attitude. Make a shit ton of money, go crazy for a few years, get caught, do your time, repeat.

I first read that as "startups" and it's no less true.

Amen

From the article: "Insider trading is always bad and you shouldn't do it -- that concludes the advice portion of this section -- but sometimes people do it anyway. And sometimes nothing happens, and other times they get sued by the Securities and Exchange Commission and have to give the money back, and other times they get charged with a crime and have to go to prison."

Not everyone agrees that insider trading is bad. The United States SEC and DOJ are the only one that prosecutes it. When they do prosecute it, they have the stiffest penalties globally. And they only do it some of the times.

Well of course not everyone agrees it's bad. The people on the inside I'm sure think it's a great idea! The entire system would collapse if it was completely legal for business insiders to profit off investors, without the latter having any knowledge. Why would anyone invest if it was guaranteed you'd get screwed over?

There are entirely rational arguments for it, such as promoting an efficient market instead of wildly speculative prices. Some market participants will always have more information than others. The largest market participants being insiders and their friends that know their shares are going to be worth way less/more before the general public gets spooked/exuberant.

The laws deterring insider trading are - as you observed - to give people CONFIDENCE that they aren't going to get screwed. Confident to gamble in the markets, because they'll be "fair".

Stock markets aren't that popular around the world partly because investors don't feel like they won't get screwed over. Liquidity really does suck in most national and regional markets!

Its all a game of confidence man.

In many places, and yes you still see this in the US as well, the driving perception is that if you have attained a place in society to have privileged information, then you have the privilege of making money from it.

I'm in no way knowledgeable, but when I was younger, I remember my dad, who ran compliance at a financial planning/ life insurance place, frequently complaining about how much shady shit people could get away with because it was really hard for the SEC to actually put together strong cases.

Are you talking about the death puts scheme? It's not at all obvious to me that it should even be considered "wrong", let alone illegal.