I seem to remember the BlockBuster stock along with lots of the other Cellar Boxed stocks doing strange stuff around the time of the original squeeze.
If I’m not mistaken that was the original impetus for the creation of the so called “eXpErTs MaRkEt”. Because we have to sAvE rEtAiL iNvEsToRs from themselves.
It’s criminal how many companies Wall Street has been able to victimize with these Bust Out & Cellar Boxing schemes.
User 1fuzzypickel and The-doctor-is-real have put in a tremendous amount of energy in compiling lists of companies that have fallen prey to these private equity driven leveraged takeovers. The list includes some very well known names such as: Blockbuster, OfficeMax, Pizza Hut, K-Mart, Neiman Marcus, Pier 1 Imports, Sears, Toys R Us, Circuit City, JC Penny, Radio Shack… and the list goes on, and on, and on.
You can find the lists here:
Can we make a list of the companies that BCG has sabotaged?
I think I have a fair grasp on how it works but it is difficult to see exactly how all the pieces slot together inside Wall Street’s black box full of imaginary numbers.
This is an intro to the Wall Street take on the classic Mob “Bust Out” scheme.
You really have to consider shorting and the “Bust Out” activities as more of a “group” activity rather than a direct dynamic between only one or two Wall Street entities. All of them have a part to play in this feted little scheme. And sure, there’s probably some stronger (RICO) ties between a few of the players here and there, but overall they don’t really even need to communicate between each other much. They can play the game just fine without too much talking, because it’s like musical parts in a band. As long as they all know who the victim company is - they can pretty much just hum along in time with each other. They all know how the song goes.
Predatory Lending and the debt trap is one of the core requirements for a successful Wall Street “Bust Out” operation.
It typically starts with getting a Board Member onboard the victim company. This can often be done through Corporate Vote Manipulation. Corporate voting is surprisingly easy to manipulate. All you have to do is borrow enough shares prior to the company vote and you can vote those shares to achieve whatever corporate action you want to accomplish. Initially the first goal is usually to get a Board Member (or members) onboard the victim company.
Once a Board Member(s) are on board you need to “trim the fat” to make the company reliant upon Wall Streets services. Specifically Debt. Debt, especially cheap debt is how they get you. How they own you. The Debt trap is why Wall Street generally does not allow companies to carry large surpluses of cash. It’s generally leached out through the Board members bonuses, their “golden parachutes”, extravagant expenditures like the company jet, the “overpriced consultants”, payed out to the majority shareholders as dividends, etc…
This is done so that companies “run lean” and they often don’t keep much cash on handset all. Instead companies borrow cash from Banks to pay big expenditures. Some even run so lean that they will not even keep enough cash on hand for payroll.
They take short term loans for things like payrolls, operating expenses. The loans are a key component. You make a company reliant on debt, and then you own them. The scam works because the stock price of a company works something like a credit score. Banks use the stock price as a key component of an analysis of that companies credit worthiness.
So if they can drop the price of a particular stock low enough through Naked Shorting, the victim company will not be able to pay their day to day bills and will go bankrupt immediately unless they obtain emergency financing from somewhere else. That’s when the predatory lenders come in. They will be willing to provide emergency funding, but at a steep cost.
The predatory lenders will often use what is called a Convertible Bond to provide funding to the victim companies. What a Convertible Bond does; is allow the predatory lenders to convert that bond into shares. The Predatory Lenders are secretly involved with the Naked Shorters that are trying to drive the stock to zero. What the predatory lenders do is structure the loan in such a way that it’s extremely difficult to pay off on time without penalty.
When the victim companies enviably can’t meet the terms and conditions of the loan, the predatory lenders “convert” those Convertible Bonds into shares and dump them on the marketplace. This further depresses the share price of the company. It’s called “Death Spiral Financing”.
Once the share price is close to zero the predators refuse to continue lending, this bankrupts the company, forces a sale, where the private equity predators again come in and scoop up the companies assets at pennies on the dollar.
The Private Equity Companies benefit by being able to keep or sell off the victim companies assets.
The Naked Shorters (Market Makers) get to keep all the profits of selling those Naked Short Shares and they get to “Cellar Box” the remaining shares of stock that has reached around $0.0001 to ~$0.0004. Cellar Boxing is taking advantage of the arbitrage between the 100% spreads at the price “cellar”. If you own $1,000 dollars worth of a stock at $0.0001, your stock value can never decline. And if you drive up the price of that stock to $0.0002, you now have $2,000 worth of stock. And because they never close those positions, they get to keep the Naked Shorting proceeds Tax Free.
The Predatory Lenders (Banks) profit by keeping the proceeds of the loans and from selling those shares obtained from the Convertible Bonds.
The DTCC benefits from all the FTDs because of how FTDs are “resolved”. The DTCC charges a “small” fee (much smaller than the actual price of the shares) to maintain those FTD records, so the more FTDs, the more money they make.
The Board Members deliberately drive the company into the ground, get fat bonuses for doing so and golden parachutes on the way out. They probably get kickbacks from bringing in the “Overpriced Consultants”. And they get to move on to their “next assignment” to bankrupt the next company.
The “Overpriced Consultants” like BCG extract fat fees from the Victim Companies and have a dual function to keep the Victim Companies on the path to Bust Out and as a data breach funneling information back to the Naked Shorters and the Private Equity company. The data breach is important because it allows the Private Equity to either sabotage innovation or to front run products.
The the Lawyers and Judges in important jurisdictions are also often involved in keeping both the regulators deaf and dumb but in making sure that court decisions swing in favor of the Private Equity as often as possible.
The politicians get paid fat “speaking fees” to look the other way. They are also fed juicy stock tips through their Wall Street lobbyists. The court officials (judges) are given lavish vacations and other monetary benefits (goods, property) to rule on the side of Wall Street. The SEC is also effectively kept deaf and dumb by the aspersions of its own staff. SEC staffers all have a big fat carrot dangling in front of the courtesy of big financial institutions. The staffers all want to move on to those cushy Bank or Institutional jobs in the financial industry that involve using their experience to circumvent the regulations that they often wrote while inside the SEC.
The other beneficiary of this little scam is the company that is going to take over that market that the Victim Company has just been forced to vacate. Amazon for example has benefited immensely by the “Bust Out” scam. They have taken over electric components from RadioShack, Home good sales from Sears, on demand video from Blockbuster, office goods from OfficeMax, Toys from Toys R Us. The list goes on and on: K-Mart, Neiman Marcus, Pier 1 Imports, Circuit City, JC Penny…
Wall Street has figured out that they can make more money by destroying companies than by supporting them. Everyone wins and makes money hand over fist doing so.
Everyone except the Victim Companies and their Retail / Household Investors. They get fucked. Hard.
Bonus material: The Bust-Out
https://www.reddit.com/r/Superstonk/comments/np33hr/amazon_bain_capital_and_citadel_bust_out_the/
https://www.reddit.com/r/Superstonk/comments/s4moop/bustout_the_movie_stock_edition_players_include/
https://www.rollingstone.com/feature/wall-streets-naked-swindle-194908/
Wall Street Whistle Blower - Laser Haas https://youtu.be/aURQbtmgrfQ
~ ~ ~ Laser Haas ~ ~ ~
Former Morgan Stanley employee. —“Gaming Wall Street” https://youtu.be/i-tKiiHWGkE
~ ~ ~ I naked short sold stocks EVERY single day ~ ~ ~
EX-HEDGE FUND MANAGER EXPOSES THE TRUTH ABOUT NAKED SHORTS https://m.youtube.com/watch?v=WUAfc4S3djU