How to manipulate Apple shares

Hedge Fund manager Doug Kass put out a rumor about Apple, cashed in, then called the rumor baseless.

In early morning trading, shares of Apple dropped down to about $437 a share, the lowest Apple has traded at in over a year. Naturally, Apple shares tanked despite reports that domestic demand for iMacs have surged nearly 32% year-over-year.

But a curious thing happened just about three hours into the trading day.

Hedge fund manager Doug Kass put out a tweet teasing the idea that Apple was going to announce a stock split on Wednesday during the company's shareholder meeting.

Surprise, surprise: it didn't take long for shares of Apple to recover, eventually closing out at $448.97, up $6.17 for the day.

And here's where things get fishy.

Shortly thereafter, with Apple trading at $449, Kass put out another tweet saying that it's about time he sell off some of his Apple shares.

Yes, "prudence" surely dictates that Kass must sell of some of his "outsized position."

I mean, it makes sense until you realize that 1 hour later Kass tweeted out that he was continuing to "pare back" as the rumor - which he effectively tweeted into existence - was baseless.

How delightfully convenient.

Now Kass writes that he sold off shares of Apple after ostensibly realizing that Apple "would require a shareholder vote to split the stock."

Doesn't it seem strange that Kass, who touts himself as a "legendary hedge fund manager" on his website, would have forgotten this oh-so-important factoid?

Well, here's Kass's explanation.

Kass said the rumor he heard regarding an Apple stock split wasn't a simple 2-1 split, but rather suggested a "more expansive split," perhaps a 3-1 or 4-1 stock split. As it turns out, Kass notes, Apple, on its own accord, only has the authority to conduct a 2-1 split. Anything greater that that requires shareholder approval.


I mean, even if one were inclined to believe Kass, his subsequent tweets don't help his case.

Kass tries to play it off as if rumors of a large Apple stock split have been making the rounds for quite some time.

Really? As someone who follows news extremely closely, I haven't seen any rumors or reports of Apple announcing a stock split in the past few days, and certainly not in the past few weeks.

Kass further emphasized in tweets to skeptics that rumors of a stock split "were all over the Street" and that he simply "confirmed and tweeted it."

What's more, if rumors of an Apple stock split have been around for "weeks," why did it take Kass until today (when shares of Apple began rising significantly) to realize that an expansive stock split from Apple requires shareholder approval?

As one would expect, Kass is being called out rather harshly on Twitter.

Kass tweeted later in the day, "If you think one person can move Apple on a rumor you are in the wrong business..."

I mean, I'd like to believe that, but as we've seen time and time again, even the most obscure, unsubstantiated and suspect rumor out of the Far East has the power to propel shares of Apple in either direction. Kass's rumor eventually wound up in the Wall Street Journal, so for Kass to act as if he has no influence over shares of Apple, he's being disingenuous at best.

And lest you think a lone hedge fund manager has no pull, remember to take a look at Jim Cramer's 2009 interview with Jon Stewart where he admitted to manipulating stock prices.

Cramer also gave the following example of how easy it would have been for him to manipulate Apple's share price downward ahead of the original iPhone announcement:

Apple’s very important to spread the rumor that both Verizon and AT&T have decided they don’t like the phone. It’s a very easy one to do, and you also want to spread the rumor that it’s not gonna be ready for Macworld. And this is very easy because the people who write about Apple want that story, and you can claim that its credible because you spoke to someone at Apple, because Apple doesn’t issue statements. So it’s really an ideal short, and again, if I were short Apple, I would be working very hard today to get that, and the way you do that is you pick up the phone, you call 6 trading desks, and you say “listen, i just got off the phone with my contact at Verizon and he said “listen, we’re a LG house, we’re a Samsung and Motorola house. There’s no room for Apple, they want too much. We’re not gonna let them in…” And I think that’s a very effective way to keep a stock down.

And whadya know, Doug Kass happens to write for The Street, an online publication founded by Cramer himself.

In any event, it's worth noting that Apple last issued a stock split back in February of 2005.

Lastly, Apple under the lead of Tim Cook has undoubtedly proven more open to changing the financial status quo of Apple than Steve Jobs. Last year, for example, the company announced a $45 billion stock buyback and dividend plan. Jobs, in contrast, was never keen on dividends.

Oh, and one more thing.

9to5Mac directs us to this doozy of a rumor from Kass a few years back:

I am also hearing that Google CEO Eric Schmidt has already begun low-level discussions with several Apple board members regarding his role as a possible temporary replacement to Steve Jobs should the options-backdating issues intensify at legal levels.

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Copyright © 2013 IDG Communications, Inc.

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