A small token purchase of your shares can serve as a strong, false psychological signal of confidence. Your buy can have rippling and lasting effects as a gesture that the lemmings can cling to as fodder for more blind purchases of your overvalued equity. One often hears the individual investor say things like "an insider only buys for one reason: they think the stock is cheap." Money talks so a small token purchase, however much of a rounding error it is compared to your ill-gotten net worth from a generous options package, will make the masses believe that you know something they don't. Your purchase can insinuate so many different things to so many different people--perhaps a positive new development is on the horizon, or maybe you are about to unleash a new "secret weapon." Your false signals can have the power to keep the fairy-tale going for a few more chapters.
An even better false signal methodology to maximize the duration of your cult-like retail investor following is to make a series of small purchases. If you can spread your purchases out over time you can keep your stock showing up on insider buying screens time and time again. This will also keep your ticker in the headlines and the subject of dozens of Tweets for weeks on end every time a small insider purchase is made. Your false signals of a small token buy can also offer a plausible cover for any future lawsuits if your company collapses.
Observance of the Law
If your business and hopes for substantial long term cash flow generation are floundering and you need to be extra bold in your hype, you should issue a press release hyping your share purchase. This is another tactic to increase the attention your false signal receives and maintain a facade for the blind capital to admire. The lemmings with blind capital should react positively to the press release hyping your false signal, but given that it is a bizarre move and may reek of desperation, it may potentially backfire by drawing attention from seasoned short sellers. Use sparingly and preferably in raging bull markets when your hype is waning. Here is a good example from TrueCar (TRUE):
"Scott Painter, TrueCar Founder and CEO, Buys 70,000 Shares of Common Stock
Thursday, February 26, 2015 02:00:00 PM (GMT)
SANTA MONICA, Calif., Feb. 26, 2015 (GLOBE NEWSWIRE) -- Scott Painter, chief executive officer and founder of TrueCar, Inc. (Nasdaq:TRUE), purchased a total of 70,000 shares in two open market transactions this week as disclosed in a Form 4 filed by Mr. Painter with the Securities and Exchange Commission.
"We're pleased that Scott is making this statement of support for TrueCar," says Steven Dietz, TrueCar's Lead Independent Director and a Partner at Upfront Ventures. "Upfront is excited about TrueCar's long-term trajectory, and we expect to hold our 10 million share position for quite some time."
Painter continues to rank among the company's top shareholders. Following the purchase he controls approximately 10.8 million shares of TrueCar common stock, including exercisable stock options, which represent more than 12 percent of the company's outstanding shares.
"I believe strongly in the long-term prospects for this company and want to participate financially in its success alongside our other stockholders," Painter said."
There are other ways and times you will be able to cash out. Depending on the cash compensation package you negotiated, your token purchase should be small relative to the size of your annual salary. If the masses swallow your false signals, you can buy yourself years worth of additional exorbitant salary and perks. Another potential way to cash out is the Elon Musk method with margin leverage--send a false signal by purchasing shares in your company's equity-offerings, but take out a loan so large from the investment bank handling the offering that you actually are putting tens of millions of cash into your pocket. This method should be reserved only for the most brazen and delusional Hypesters.
Law #24 Authority: Philip Frost, CEO of Opko Health
OPK is the quintessential example of sending false signals. Despite blowing more hot air and missing more milestones than even Elon Musk, OPK has garnered a militantly bullish cult lemming following. OPK will be featured in many more Laws of Hype and thus should be studied and scrutinized by enterprising Hypesters in how to conduct a Hype Campaign built upon no fundamental foundation. OPK is run by an individual so hyper-focused and obsessed at defending the illusion of progress, they will go so far as issue press releases to clarify why insiders sell stock. Even as a $6 billion company, OPK's CEO Philip Frost often conducts interviews on retail day trader oriented pump-and-dump websites, to spread the Hype to all corners of internet chat rooms.
One can quickly and easily search Twitter for $OPK to see the pervasiveness of cult shareholders due to Frost's frequent insider purchases.
Additionally, here is just a small sampling of headlines on various investment websites that could be generated by your false signals:
Opko Health's Insider Buying A Rx for Profits?
Opko Health: Frost Resumes His Insider Purchases
Meet Dr. Phillip Frost, The Hypertrade of Opko Health
Opko CEO Adds to Buying
CEO Phillip Frost Increases Stake in Opko
Opko Health Inc: Frost's Binge Keeps Moving
Opko's Frost: The CEO Who Keeps Buying His Company's Stock
With enough false signals generating a higher stock price, ultimately you may be able to buy a real business with your inflated equity currency before your Potemkin Village is discovered as a pure facade of business durability.
Transgression of the Law:
Kevin Conroy, architect of EXAS' epic hype campaign recently sold shares after his stock had sold off aggressively when the company had to report lack of sales execution for their only diagnostic product. Unless the wheels are imminently about to fall off and you are desperate to cash out, selling directly after a massive decline and showing zero price sensitivity to cashing in your options is the opposite of what you should do to lengthen the duration of your hype's effect--it will portray weakness and can be taken as a sign of panic. Only resort to this when there is little hope of your Hype Campaign resulting in your stock reattaining its previous highs.
Historical Case Study: It is imperative to not make the amount of capital for your false signal too large for you to handle. You have to understand your false signal is a potentially equivalent to a sacrificial lamb...it is meant to buy you time and infuse a false sense of confidence into the marketplace. If at all possible, you should have a surrogate act on your behalf--encourage the company's executives and board members to send the false signals for you. On October 24th, 1929 (what is known as Black Thursday), Richard Whitney was used precisely as such a surrogate. Whitney was Vice President of the NYSE at the time and one of the most well known and well liked financiers of the era. The leaders of Morgan Bank, Chase National Bank, and National City Bank of New York tried to send a false signal to stem the panic in the market. With much hullabaloo and the resources of the banking cabal, Whitney marched on the floor of the NYSE and bought 10,000 shares of US Steel at $205, an above market price. This was quite a substantial sum at the time. This false signal did help to quell the chaos temporarily...for about one day, but ultimately proved as fruitless as trying to put out a blazing forest fire with a spray bottle. When possible, use a surrogate's capital and refrain from putting your own money in harm's way as your house of cards could come falling down at any moment. The timing of your false signal is everything. Don't step in front of a freight train, or if you must, use someone else's money.