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A bear raid is a type of
stock market
A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange a ...
strategy, where a trader (or group of traders) attempts to force down the price of a stock
Stocks (also capital stock, or sometimes interchangeably, shares) consist of all the Share (finance), shares by which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporatio ...
to cover a short position. The name is derived from the common use of ''bear'' or ''bearish'' in the language of market sentiment to reflect the idea that investors expect downward price movement.
A bear raid can be done by spreading negative rumor
A rumor (American English), or rumour (British English; American and British English spelling differences#-our, -or, see spelling differences; derived from Latin 'noise'), is an unverified piece of information circulating among people, especial ...
s or misinformation about the target firm, which puts downward pressure on the share price. This is typically considered a form of securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information.manipulating the price with the large volume of selling, making the strategy self- perpetuating.
The practice of bear raid has its roots in the 17th-century
History
The practice of bear raid has its roots in the 17th-century Dutch Republic
The United Provinces of the Netherlands, commonly referred to in historiography as the Dutch Republic, was a confederation that existed from 1579 until the Batavian Revolution in 1795. It was a predecessor state of the present-day Netherlands ...
. In 1609, Isaac Le Maire
Isaac Le Maire (c. 1558 in Antwerp – September 20, 1624 in Egmond aan den Hoef) was a Dutch entrepreneur, investor, and a sizeable shareholder of the Dutch East India Company (VOC). He is best known for his constant strife with the VOC, ...
, a sizeable shareholder of the Dutch East India Company
The United East India Company ( ; VOC ), commonly known as the Dutch East India Company, was a chartered company, chartered trading company and one of the first joint-stock companies in the world. Established on 20 March 1602 by the States Ge ...
(VOC), organized a bear raid on the stock of the company.
See also
* Short and distort *Uptick rule
The uptick rule is a trading restriction that states that short selling a stock is allowed only on an uptick. For the rule to be satisfied, the short must be either at a price above the last traded price of the security, or at the last traded pric ...
References
Stock market Finance fraud Dutch inventions {{finance-stub