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Anonymous Hackers Turned Stock Analysts Are Targeting US, Chinese Corporations (softpedia.com)
An anonymous reader writes: A smaller group of Anonymous, called Anonymous Analytics, reached the conclusion that DDoSing is stupid and never fixes anything, so they decided to use their hacking skills and stock market knowledge to make a difference in another way. For the past years, the group has been compiling market reports on U.S. and Chinese companies and publishing their results. Their reports have been noticed by the stock market, who recently started to react to their findings. The most obvious case was of Chinese lottery machine maker REXLot. The hackers discovered that REXLot inflated its revenue and the amount of cash on its balance sheet, based on the amount of interest earned. "The group published its findings on June 24, 2015, and REXLot stock price plummeted from 0.485 Hong Kong dollar per share to 0.12, before trading was suspended [for ten months]. REXLot rejoined the market on April 18, 2016, this year, but even after submitting a 53-page report, the company stock fell again by 50 percent," reports Softpedia. Anonymous Analytics then published two more reports on the company, urging the market to sell, and two days later, Reuters reported that REXLot did not have enough cash to make due bond payments, which meant the company had to sell assets to repay bonds. Other companies on which the group published market reports include Qihoo 360 and Western Union.
and following the money.
with perfect knowledge so the free market capitalists should be happy !
CPA and former auditor here. I'd be shocked if a publicly traded company was actually able to materially misstate cash. It's one of the easiest balance sheet items to audit, and publicly traded companies are required to be audited. You literally pull the bank statements as of the end of the year. The cash is either there or it isn't. There are a few reconciling items such as deposits in transit or checks that haven't cleared, but it's typically not a lot. I haven't read Anonymous' report, but it doesn't pass the smell test.
Years ago, I developed a system to analyze stock option prices in real time for the purpose of automated trading. The algorithm was designed to detect overbought and oversold options, and trade ahead of the inevitable market correction.
Although the system worked, it occasionally lost scary amounts of (simulated) money. It seems that some people traded high volumes against the market, buying into options that were already overbought, selling even when the option was oversold. It seemed as if these traders knew something that everyone else didn't. Sure enough, the company would report something surprising, and the market would move in favor of the people who traded ahead of the news.
Ultimately, I abandoned the notition of automated options trading, but not before discovering how well the system could detect insider trading. The options market is subject to all sorts of shenanigans, but it's a pretty good advance indicator of the underlying stock. The more insider trading a company has, the better the algorithm works.
If these Anonymous people are conducting research and detecting public reporting anomalies, the path of maximum profit is to short sell the stock, knowing that the price will fall when the truth finally emerges. Using this method, you instruct your broker to " short sell" 1000 shares of XYZ Corp. The broker "borrows" the shares from someone else's account and sells them. You get the cash and the obligation to return the shares (cover the position) at a some future time. If all goes well, you can keep the position open as long as you like, wait for the stock to fall, and then cover (buy back and return) the borrowed shares at a lower price.
Looks like the hackers found a few cash cows. Good for them!