A massive stock market bubble, which has seen the U.S. stock market soar more than 300 percent over the past year, is being exploited by some to make a quick buck.
A new study published Monday by the International Finance Corporation suggests that a handful of top financial firms are profiting from a loophole that lets them buy up to 1 percent of a company’s stock in a bid to boost its value and drive up its market cap.
In other words, if a firm wants to buy up a company and boost its market value, it can do so without paying anything to the stockholders, who would have no say in the matter.
The IFC study found that four firms that have been selling shares of their firms to investors have received $9.6 billion in fees for the privilege.
One of the companies is CFO Capital Group, which owns the Boston Red Sox baseball team.
Its stock price soared more than 6,300 percent from March through April, while the Red Sox were on the brink of losing the World Series.
The firm’s CEO, Robert A. McGlothlin, has been the target of protests by members of the sports world.
McGlothlen is currently under fire from the Red Wings’ fans, who have staged a “die-in” outside his office.
“I’ve always been a big believer in fairness and equity, but I don’t believe in giving away any of our stock to anyone,” McGlotlin told The Hill in an interview in November.
Some of the firms in the study were also among the top 10 earners in their industry, with shares worth up to $9 billion.
Other firms in this category are Citigroup, Bank of America, and JPMorgan Chase.
According to the IFC report, the top ten firms in terms of total fees were Citi Group, BankofAmerica, JPMorgan Chase, and Citigroup.
Citi Group earned $7.2 billion in total fees from March to April, and Bank of Americans earned $5.9 billion in the same period.
JPMorgan Chase earned $3.9 million, while Citigroup earned $1.9.
These firms have been on the receiving end of criticism from members of Congress and the public alike for what some call an unethical profit-making scheme.
Congresswoman Jackie Speier (D-Calif.), the ranking member of the House Financial Services Committee, said she was “furious” that the firms were allowed to make so much money from such an unscrupulous way to manipulate the market.
“These firms are selling stock in the hopes that they’ll get some short-term profit,” Speier said on Capitol Hill.
“That’s not what the market is about.
If these firms are so good at manipulating the market, why is it they’re profiting off of the financial system?”