
Ask HN: Is shorting a competitor stock legal before launch? - theturtletalks
So let&#x27;s say you&#x27;re launching a product that you feel rivals an incumbent and may cause their stock to dip in the following months.<p>Is shorting their stock trading on insider information?
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__d
Please note, IANAL, YMMV, etc, etc.

If you (or your spuose, family member, friend, gym buddy, whatever) work or
worked for the competitor, it could be insider knowledge. I think that's not
your problem.

If your product could be construed as being an attempt to lower the stock
price of your competitor, and not a good faith attempt to compete, then I
think you'd be committing fraud.

Consider ... your product launches, your competitor's stock falls, you make
money on your short bets, your product then fails.

Can you _prove_ in court that your product's failure wasn't just an attempt to
make money off your shorts?

Again, I'm not lawyer: talk to a real one.

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ziddoap
To save people some time, since your asking about law, is it safe to assume
you are located in the US and subject to the SEC?

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theturtletalks
Yes

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ziddoap
Rudimentary research done by yours truly, not a lawyer, indicates that it is
potentially legal but not necessarily a smart move to make.

Regarding the legality, I believe it would be difficult to argue that your
knowledge would be considered "material" to investors - given that there is no
guarantee that your product is going to even affect an established competitor,
let alone eat their stock price. Your confidence doesn't translate to empircal
evidence of non-public material knowledge.

Regarding the financial side, just keep in mind that it takes a long time for
investors to move on something like this. Months, likely. It will take time
for your product to gain traction, then it has to hit the eyes of the
competitor, then it has to hit the eyes of the investors of that competitor,
then it has to be convincing enough for that investor to change their
established position. If you're really confident, and have money to spend, it
appears to be an option for you.

However, the biggest sentiment I found was: "Talk to a lawyer, not people on
the internet when your company and/or financial life is on the line".

Because you shouldn't put your money on the line based what I, or other
internet-goers say.

