Poop: An Overview

In addition to its nautical and scatological meanings, the word poop may describe inside information of value that is not known to the general public or even an individual who possesses and communicates such information. In the financial world, a poop is a person who has access to nonpublic facts which can be used to financial advantage in a securities market.

Key Takeaways

  • Poop, in the financial world, is inside information that can be used for the benefit of the recipient.
  • A poop is a person who conveys the information.
  • If the information is not yet disclosed to the public, both the poop and its recipient may be committing a crime.

It is illegal to buy or sell stock based on material insider information, with severe financial penalties or even prison time for a person who acts on information about a publicly-traded company that has not yet been revealed to the public.

Poop usually falls somewhere between material insider information and gossip.

Understanding Poop

The word poop is used interchangeably with other slang terms such as low-down, the skinny, or dope.

Poop is used primarily to refer to inside information, and not only in a financial context. The term might be used in a sentence such as, “She gave me all the poop on the office party,” or “Is that the straight poop?”

Poop is often a piece of gossip or anecdotal information that can be used to give a trader an edge.

Poop does not usually rise to the level of insider information. When it does, it can be a serious crime.

An Example of Illegal Use of Poop

For example, if a pharmaceutical executive dumps stock after receiving an unfavorable report on a new drug's regulatory status that has not been released to the public, it's a crime. If the executive tips off a friend to dump the stock, and she does, it's a crime. That's how Martha Stewart wound up in prison in 2003.

More often, poop is anecdotal information or gossip conveyed by an insider that is of use to traders in predicting a company's short-term performance. A salesperson might complain about a severe slowdown in sales. A factory worker might comment on the poor quality of a product the factory is turning out. If a person has insider information and passes it along, he or she is a poop.

Who the Poops Are

A poop is usually someone who works for or close to a publicly-listed company. Using confidential knowledge could provide an unfair advantage if the information is not yet public.

In the United States, the Securities and Exchange Commission (SEC) oversees legal and illegal insider trades. Legal insider trading, in which corporate officers, directors, and employees buy and sell stock in their own companies, is subject to certain regulations and the transactions must be properly filed and registered with the SEC.

Nevertheless, traders watch legal insider trades closely. There might be poop in that sale.

Poop and Scoop

The term poop is also used in a financial context when referring to a poop and scoop scheme.

This is a highly illegal form of insider trading that carried out by a group of traders who drive down a stock’s price by spreading false and damaging information so they can purchase the stock at bargain prices.

Poop and scoop is the opposite of the better-known pump and dump, in which an individual or group spreads false information to artificially raise a stock’s price so they can sell their holdings at an inflated price.