How ‘The Wolf of Wall Street’ made his money The majority of us have watched Leonardo Di Caprio star as the drug infused rogue investor that made millions of dollars and eventually ended up being caught by the ‘rozzers’. But how exactly did he make his money? The fundamentals behind how Jordan Belfort, the wolf, made his and his firm’s Stratton Oakmont money is rather simple. He and his band of brokers would buy up stock of a company, generally small companies, and eventually they would own a large percentage of the company. Now that the Stratton had all this stock, and let’s say the stock was valued at $1 a share at that stage, Jordan and his brokers would ring clients and try to sell them this stock by telling them that this stock was the next big thing. Stratton Oakmont sold a percentage of the stock they owned in the company and would force the price of the stock to increase. Let’s say to $10 in this case. So the stock that Stratton still held onto had increased superficially (because the only reason the price increased was because the brokers had sold the idea that this stock was going to be the next big thing and demand had increased) to give Stratton a profit of 1000%. Stratton would then sell all the stock they owned and the price of the stock would fall back to pre-Stratton levels of $1. The clients would lose all their money while Jordan and Stratton rolled it in. This method of stock manipulation is referred to as the ‘pump and dump’. The brokers pump the price up and then sell (dump the stock) to make their profits and cause the price to drop. - Jack Newby
Posted on: Mon, 17 Mar 2014 14:30:38 +0000