What is Poop and Scoop?

Key Highlights

• Poop and scoop is an illegal technique when a few well-informed individuals try to manipulate the price of a stock by circulating false information about it.
• Such schemes are made possible by the proliferation of internet communities, platforms, and finance discussion groups that make it easy to implement them without requiring significant investment.
• Participants of "poop and scoop" may face legal action.

Understanding Poop and Scoop

Poop and scoop is a systematic trading technique used by certain market players to affect stock values. Poop and scoop is an illegal transaction in which a group of market players attempts to manipulate the stock price by circulating false information. After that, they purchase the shares at discounted prices, profiting from the false information that eventually reaches the public.

Market manipulators profit from the panic-selling tendencies of traders and investors by employing the "poop and scoop" technique. Though it misleads investors and goes against their interests in the financial market, poop and scoop offers market manipulators an attractive chance.

In contrast to the pump and dump approach, there is the poop and scoop. The pump-and-dump strategy spreads positive, misleading statements about a specific company to increase the share price. Market manipulators, on the other hand, benefit from a high market value for their holdings in pump and dump. Poop and scoop are thought to have less potential than the pump and dump method.

Securities fraud and market manipulation are defined by the Securities Exchange Act of 1934 as including poop and scoop activities. The Securities Exchange Commission strictly prohibits and punishes such conduct.\

Example of Poop and Scoop

Rahul, Raj, and Aryan are aware of the company ABC Ltd. They know the company will be merged with a giant in the industry, XYZ Ltd. As soon as the merger is announced to the public, this news will likely affect an increase in the share price.

Rahul, Raj, and Aryan are trying to make bad news public to convince shareholders that the company is doing badly. The stock price is decreasing further, so they should sell their shares. By misleading investors, they were planning to buy the stock at a lower price. Some shareholders believed those claims and started to sell their shares, pushing the price down.

As expected, all three manipulators were buying the stock for a reduced price. The company, ABC Ltd., announced its merger with the XYZ Company some time ago. The stock price began to rise and reached an all-time high on the news. Hence, Rahul, Raj, and Aryan exited their shares with big profits.

How Do Poop and Scoop Work?

It starts with a reasonably informed group of market participants who want to reduce the price of one specific stock and buy it at a discount. They circulate false rumours and wrong information, confusing the general public with particular stocks. This is called ‘poop’ in this reference. If such an attempt traps uninformed investors, they will begin to sell their shares. This results in a significant decrease in the price.

Then, a group of market manipulators buys the stock at a discount. This is called the Scoop. Once the general population has realised that such rumours and news are false, demand for their stocks increases again. The price of the stock reflects the original level or exceeds it. As a result of the increase in prices, manipulators may gain an increased market value for their holdings.

Poop and Scoop and the Internet

The poop and scoop approach has a much more significant potential impact since the internet is so widely used. A negative word or idea about the company can be widely distributed quickly to traders with as little voice as possible. The spread of false rumours about a company can lead to catastrophic declines in the value of its shares for traders or unhappy former employees.

Conclusion

In conclusion, one of the unlawful methods of manipulating the stock price is poop and scoop. Market manipulators attempt to drive down the price of stocks in poop and scoop by trying to buy them at a discount and sell them at a premium. Investors and traders must avoid such manipulation of the market.