The term “blind pig” has an unconventional origin – it emerged from the 1800s, when dishonest proprietors of bars or saloons would allow patrons to gamble in back rooms of the establishment. People would enter these places by paying a small entrance fee – the figurative fee for seeing a “blind pig.” This sly business practice has made its way into the modern business lexicon, but with a different context: A “blind pig” is a strategy employed by some companies when they have knowledge of an upcoming merger or other development in the market that affect the company’s stock price. This knowledge is kept secret from the public, while the company takes advantage of a short-term speculative run-up in its stock before the news is released.
How to Legally Take Advantage of a Blind Pig Opportunity
When the stock market is awash with speculation, companies may be looking for ways to use their insider knowledge to gain an advantage. While it may be tempting to use insider information to achieve short-term gains for a company, it’s important to remember that it is illegal in most countries for non-public information to be used to inform a trade. Therefore, companies should be cognizant of the strict regulations concerning the use of insider information.
In legal terms, a blind pig strategy is a type of “short-term trading.” It involves the use of non-public information to inform buying or selling decisions and capitalize on the temporary increase in the stock price that follows the news. The key is to identify the economic variables that influence the stock price and to use them to make correct investment decisions. For example, a company needs to know when a merger announcement is coming and predict the magnitude and direction of the price movements.
The Risk of the Blind Pig
Of course, the risk with any type of short-term trading is that the market can sometimes move against the trader’s prediction. If the stock moves the wrong way or fails to move in time, the profits could turn into losses. Additionally, the legal consequences of non-compliance with insider trading regulations can be severe, ranging from fines to jail time.
In conclusion, trading in accordance with a blind pig strategy can be very beneficial, but only if the company fully understands the legal repercussions of a failed trade. It is important to remember that the use of non-public information to inform trading decisions is illegal in most countries, and companies must be very careful when considering such a strategy.