Whisper Stock
Candlefocus EditorWhisper stocks can occur due to other possible events as well, though none of them offer long-term benefits such as potential buyouts. One of the most common sources of these rumors is insider trading. Insiders, such as employees and executives of a company, are in possession of non-public information that can be used to trade on their own behalf. When these individuals buy or sell stock based on their private knowledge, it is illegal.
Unfortunately, investors are often tempted to try and speculate on information they acquire through second-hand sources- office gossip in particular. Acting on potential buyout rumors can be an appealing form of speculation, and the potential for large profit can be too inviting to pass up. Investing based on third party information is a risky move, however, as the possibility of a buyout is usually circumstantial and speculative in its accuracy. Investing any capital based on a rumor can lead to a significant financial loss.
In conclusion, investment in whisper stocks can be an uncertain yet highly lucrative endeavor. Although the potential for short-term profits can be large, trading on the basis of unfounded rumors should be avoided as it can lead to financial disaster. Before engaging in any trading activity, it is recommended that investors consult a financial advisor to evaluate the underlying assumptions and likelihood of success.