What is a Bear Raid?

A bear raid is a coordinated effort by a group of investors to short sell many shares of a company. When combined with a campaign of planting negative stories (such as rumors of financial difficulties) on social media and online message boards, the intent is to trigger a major sell-off that drives down the price of a company’s shares, allowing the original group of short sellers to buy back shares at a low price, thereby reaping significant profits. Bear raids are most commonly targeted at companies that have been reporting declining results, so that the investment community will be more likely to believe the false rumors.

A coordinated short selling campaign of this type is considered by the Securities and Exchange Commission to be market manipulation, and so is illegal. Also, spreading false rumors is classified as a fraudulent activity. Consequently, bear raids are illegal, but still occur when short sellers are careful to hide their activities from authorities.