Securities and Exchange Commission staff economists say they cannot find evidence that failure to deliver shares in initial public offerings is caused by manipulative trading, the Wall Street Journal reports.
The study examined 295 IPOs over 16 months, starting in January 2005. The economists found that stock delivery failures, which some critics see as evidence of market manipulation, occur regularly in IPOs and they didn’t find evidence that traders engaging in “naked” short selling are to blame.
Short sellers borrow shares to sell in hopes of profiting by replacing the borrowed shares at a lower price.