Comment by Retric
16 years ago
The only problem is they rarely buy the whole company, often they just get a controlling share. At which point they can do a pump and dump which is great if you sell at the right time but it tends to hurt long term investors.
How do you pump and dump a large company that you just purchased at a premium?
Incidentally, if such a pump and dump scheme was performed, the guilty party is completely obvious. A minority shareholder lawsuit would be readily forthcoming.
There are several approaches you can use on large company's including Enron style accounting fraud but clearly it's much simpler with small ones. Other options include http://www.paulgraham.com/submarine.html where you try to hype the market segment not any of it's products. But a far more legal approach is to simply kill off the R&D program and look for a sucker/greater fool to buy the rotting shell which looks great on paper.