DEFINITION of Poop And Scoop
The idea behind a "poop and scoop" scheme is a highly illegal practice occurring mainly on the internet. This occurs when a small group of informed people attempts to drive down a stock's price by spreading false information, rumors and otherwise damaging information. If they are successful, they can purchase the stock at bargain prices, as the overall marketplace will have sold off the security, causing the price to fall dramatically.
BREAKING DOWN Poop And Scoop
Poop and scoop is the opposite of a "pump and dump," in which one or more individuals will spread false information on a security in the hopes of raising the price artificially and being able to sell their position at a much higher price. Both of these practices are illegal activities and punishable by the SEC in the United States.
A similar tactic employed by insiders is "short and distort," where instead of buying the stocks at a discount when rumors and false information cause the price to drop, unethical investors short sell the security for a profit. Recognizing a building short position in a company, a poop and scooper could also parlay off the noise genuine shorters are generating. For instance, an activist hedge fund could be publicly amassing a short position, while making it well-known they're launching a campaign against certain corporate actions. To capitalize on the negative news surrounding the stock subject to scrutiny, a poop and scoop opportunist could help the activist hedge fund by exaggerating and adding to the negative news, while also accumulating a short position. However, there's a big difference in the motives behind the poop and scoop and hedge fund investors: The poop and scoop play is a deliberate attempt to manipulate a stock price, while an activist hedge fund is exercising the gears of capitalism.
The explosion of online communities, platforms and financial hangouts has greatly added to the misinformation issue. In many ways, companies cannot keep ahead of the spread of fake news — even the best PR and communications teams are hamstrung by regulatory oversight. The rise of influencer marketing hasn't helped financial markets maintain order. For example, it's not uncommon today for a single tweet to send a stock's price sharply lower. This perplexes regulators as it's hard at times to ascertain the true intentions of a social media post.