Legal Definitions - bear raid

A bear raid refers to a manipulative and illegal market practice where a large investor or a coordinated group of investors intentionally sells a significant volume of a company's stock within a short timeframe. The primary goal of this aggressive selling is to artificially depress the stock's price, often to profit from its decline or to damage the company's reputation. Such actions are prohibited by federal securities laws because they distort fair market prices and harm other investors.

• Example 1: A hedge fund, having taken a substantial "short" position in a pharmaceutical company (meaning they profit if the stock price falls), begins to aggressively sell millions of shares of that company's stock over a few hours. Simultaneously, they might spread unverified negative rumors about the company's latest drug trial results. This rapid, high-volume selling causes the stock price to plummet, allowing the hedge fund to cover its short position at a much lower price and realize a significant profit.

  Explanation: This illustrates a bear raid because a large trader (the hedge fund) engages in high-volume selling with the explicit intent to drive down the stock price quickly for financial gain, which is a form of market manipulation.

• Example 2: A major technology firm, through a discreet investment vehicle, orchestrates the rapid sale of a substantial block of a smaller, innovative competitor's stock. This sudden and unexplained sell-off causes the competitor's stock to drop sharply, creating investor panic and making it more difficult for the smaller company to secure necessary funding for its expansion plans or to complete a planned acquisition.

  Explanation: This demonstrates a bear raid as a large entity (the tech firm via its investment vehicle) uses high-volume selling to rapidly decrease a rival's stock value, not necessarily for direct short-term profit, but to inflict damage and gain a competitive advantage, which is still an illegal manipulative intent.

• Example 3: A group of influential online traders, coordinating through private channels, targets a publicly traded retail chain that has recently reported slightly weaker-than-expected earnings. They collectively agree to dump a massive number of shares of this company's stock within a single trading day. This coordinated sell-off triggers automated stop-loss orders from other investors, creating a cascade effect that drives the stock price down significantly, allowing the group to potentially buy back shares at a much lower price later.

  Explanation: This exemplifies a bear raid because a coordinated group of traders acts in concert (effectively functioning as a large trader) to rapidly sell a high volume of stock with the intention of artificially driving down its price for their financial benefit, constituting illegal market manipulation.