Back before the GameStop bubble definitively fizzled, an old friend posed a question: If a stock is soaring for no discernible fundamental reason at all, and you are in a position to sell an unlimited amount of this stock at this vastly inflated valuation on account of being the company who’s stock is in question, shouldn’t you do so, and as quickly as possible? Matt concluded there are very good reasons to do such a thing, but also some very good reasons not to do them, primarily of the lawsuit-drawing variety.
The corporate-finance division of the SEC, which regulates U.S. securities markets, released guidance advising companies to provide tailored disclosures about their current finances, market events and the potential effect of share sales on investors.
The regulator provided a sample letter it may send to companies in which it asks for information, such as risks associated with the recent volatility in their share prices. The sample questions aren’t exhaustive, the SEC said. Based on responses, companies may be instructed to revise their financial disclosures…. The guidance is particularly relevant because the SEC usually doesn’t review documents related to raising capital such as automatic shelf registration statements before they are acted upon