Sign of the tough times: Even National Lampoon execs accused of stock manipulation

Another day. Another stock manipulation charge. This time against National Lampoon. Yes, that name does ring a bell doesn't it? Could it really be what I think it is? Why, yes, it is none other than the company that holds the rights to the infamous college movie from the late 70's: Animal House. I'm not into that type of movie and think it's overrated but many would disagree with me. In any case, clearly their movies haven't been generating much money lately, given that the executives are being accused of illegally propping up the stock price:

Federal prosecutors in Philadelphia have filed charges against the chief executive officer and other executives at National Lampoon Inc. [NLN-A], saying they tried to inflate the company's stock price.

Los Angeles-based National Lampoon owns the rights to the “Vacation” and “Animal House” movies, among others. Prosecutors charged seven people with conspiracy and securities fraud on Monday.

Prosecutors said the company manipulated prices by paying kickbacks to people to buy and hold stock. Authorities said that activity created the illusion of market interest.


One of the risks of investing in microcaps and smallcaps is the potential for market manipulation, insider trading, and such dubious schemes. These things can happen to any company but is less of a concern with large caps. If you wanted to drive up the stock of a large-cap by 5%, you may need to spend hundreads of millions of dollars; in contrast, a typical executive or a board member, who is almost always wealthy, can easily manipulate microcaps and smallcaps to their liking.

Comments

Post a Comment

Popular Posts

Thoughts on the stock market - March 2020

Image
Right now, DJIA has a P/E of 16.8 and forwand P/E of 15.1, whereas S&P 500 is at 20.1 with forward P/E of 15.8. Source: WSJ market Data If you ignore interest rates and inflation expectations--both of these influence valuations but depends on your macro call-- the market is not cheap. Long-term P/E is around 15. Trailing P/E is around 20% (Dow) to 40% (S&P500) higher than average. Forward P/E is in line with long term average but that assumes a strong V recovery. Consensus forecast is for profits to drop 1.2% in 2020. In 2008, it dropped 25.4% so current forecast is a very mild recession. Covid-19 coronavirus is not going to last more than a few months but these forecasts are still too rosy in my opinion. So I wouldn't rely on forward P/E. The richly valued (mostly tech or high quality) have not fallen much but the distressed ones have. So if you want to outperform in the long run, I think one’s choice right now is to: • Wait for market to fall another, say...
✖ READ MORE >>>

Warren Buffett's Evolution and his Three Investment Styles

Image
A Young Warren Buffett In a comment to one of my posts , Mark Carter, who incidentally appears to have a  good blog worth checking out , asked: "Buffett Prime is 1970's to early 1990's" Could you elaborate? I have vaguely indicated how I view Warren Buffett in the past, but I thought I would detail my view of his investing behaviour. This is more of an opinion piece and many others would disagree with me (if you do, I'm curious to hear your thoughts). I don't follow Warren Buffett as closely as many value investors so I may get some facts wrong. My view is that Warren Buffett went through three different phases, with each consisting of different investment techniques. The overall investment theory remained the same—what people call value investing—but his execution, tactics, and strategy differs across the three phases. Some people may break up his career into additional periods but my feeling is that the three I will describe essentially capt...
✖ READ MORE >>>

Hugh Hendry discussion at the Alternative Investment Conference

Thanks to Value Investing World for bringing this Hugh Hendry interview to my attention. I may not agree with all the things—short-term orientation of hedge funds is actually worse IMO; the sharp pencil effect doesn't always work—but Hendry is a true contrarian and worth listening. Like Marc Faber or Jim Rogers, you also can't take everything Hugh Hendry says seriously. I had always felt Hugh Hendry was firmly in the deflation camp but I get the feeling that he is now opening up to high-inflation possibilities. Otherwise, his stance appears to be similar to past opinions.
✖ READ MORE >>>