Apple shareholders at risk; scam artists will try to use Apple’s information vacuum

Verizon iPhone 4“Warning, Apple Inc. stockholders: Scam artists in the stock market are going to try to cheat you out of your money,” Brett Arends writes for MarketWatch. “They already know how they’ll do it. They’re working on the details right now. Count on it.”

“Maybe it’ll be a semiprofessional hedge fund in Connecticut. A money manager in La Jolla, Calif., or West Palm Beach, Fla. A couple of former college roomies in Silicon Valley or Seattle,” Arends writes. “The scam is easy; some will fall for it.”

“Here’s how it’s going to go down: First, scammers will go into the derivatives market and buy a bunch of put options on Apple shares. Puts are effectively a bet that a stock will drop quickly. Then they’ll send out word that Steve Jobs is terminally ill with cancer and isn’t expected to return to work,” Arends writes. “Simple. Easy. Free money.”

“The stock will plummet. Nervous investors will bail in panic. The put options will balloon in value. (Look at what happened earlier this week: Apple stock initially dropped more than $20 on news of Jobs’s new health problems.) The scam artists will cash out, and walk away,” Arends writes. “What makes this possible is Apple’s refusal to say anything whatsoever about Jobs’s illness or his absence… Nature abhors a vacuum. And if Apple won’t offer details, that leaves the door wide open for others.”

Read more in the full article here.

MacDailyNews Take: With history as our guide, we can’t disagree with Arends on this one.

34 Comments

  1. “What makes this possible is Apple’s refusal to say anything whatsoever about Jobs’s illness or his absence”

    Wrong as usual. Apple actually has said sonething about Jobs’s absence. In fact, they’ve said all that they are legally required to say about Jobs’s absence.

  2. First off, how does anyone know whether or NOT there is a succession plan in place? We, the shareholders are NOT entitled to a succession plan. All a written PUBLIC plan does is let those top execs know they are NOT wanted. It lets other companies know who is considered good talent to poach and who is vulnerable.

    Apple is loathe to discuss business operations in public, so, it may have a plan already in place. It may just choose NOT to put in on it’s home page…

    NEXT, no one has a right to know about Jobs’ health issues. The only right we have, is to know that, for an indefinite time, he is taking leave from the company for medical reasons. Apple announced this. Anything else is a violation of his privacy. And in fact, it may be a violation of certain HIPAA laws.

  3. Hey bobo,

    If the whole thing upsets you so much, why don’t you just sell your stock? Or, I hope you are begging every other company that you hold in to tell you their succession plans, too!

    For me, I am sick of all these armchair investors claiming they know what’s best for Apple. Trust me, it was not your tiny investment that made them great. The other issue I have is everyone jumping on the band wagon that Apple will fail without Steve. Please go talk to Disney, GE, Ford, Mercedes Benz, Walmart, etc. that they should close up shop since their visionary leaders are no longer with us.

  4. They have done this exact sort of thing over and over for a decade. No matter how good the announcement, or how much it goes up immediately afterward, there is typically a letdown that hedge funds try to accelerate with rumor and tactical trading. Apple is especially vulnerable to this strategy because there are so many investors with gains to protect, so much mythology about a cult of personality bullshit, and a very tight lipped PR function at the company. All you can do is ride it out, or if they drive it really low, add to your position.

  5. If you buy and hold, then short term stock fluctuations resulting from manipulators will have no effect. That doesn’t make it right, but there is no need to panic. If you believe that AAPL is likely to go down, then you should reconsider that investment. If you tend to emotionally react to rising or falling share prices, then you should reconsider your investment strategy – perhaps mutual funds with periodic, scheduled investments will ease your concerns.

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