Stock Manipulation

Lies, Damn Lies and Analyst Reports

frankfurt boerse dpa
Some powerful market analysts are abusing their power to affect stock valuations to manipulate share prices, experts say. Pictured: The Frankfurt Stock Exchange.
  • Why it matters

    Why it matters

    Some publicly traded German companies are being targeted by activist investors armed with dubious analyst reports designed to manipulate share prices and generate illegal profits. The German regulator Bafin warned investors of the abuse this week.

  • Facts

    Facts

    • A number of German companies have recently been hit with critical research reports, published and indirectly paid for by aggressive activist investors seeking to gain control or benefit from artificial stock price fluctuations.
    • The German financial regulator Bafin this week warned investors to consider the source of analyst reports but said it could do little to police the industry, except in cases of deliberate falsehoods or undisclosed conflicts of interest.
    • Many companies are equally aggressive about intimidating independent research, and as a result, the vast majority of analyses of German shares are rated as a BUY.
  • Audio

    Audio

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For senior managers at Stada, a publicly-listed German pharmaceutical company, the week began with loud alarm bells ringing.

The investor Active Ownership Capital had bought a large stake in the company and wasted no time in going on the attack: five of the 6 members of the board had to go, demanded the new investors.

To support their claim, they published a report written by the investment group’s own analysts, claiming to show that Stada’s share price and its business were falling far behind its rivals.

This is just one example among many of an attack made with the help of analysts.

Almost every week, activist investors show up at some company or other, with a devastating report in hand, propagating dubious information and demanding radical changes. The short-term goal is usually to move the share price one way or another.

And it usually works.

The weapon of choice here is the in-house analyst and their supposed well-researched, critical reports.

But unlike analysts at banks and investment houses, who are at least theoretically independent, these analysts produce knowledge to achieve a specific goal. No matter whether the aim is to drive a target share up or down, it usually causes a crisis in the company under attack.

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