What Is The Cause Of Blockbusting?
It’s usually created by a clever marketing team that creates excitement about the company’s potential and its product, which sends share prices skyrocketing.
The problem, however, is that most blockbusters turn out to be disasters because they lack any substantial plan or experience in the industry. Many investors lose money when they sell their shares after it inevitably crashes and prices plummet.
Also, many blockbusters rely on the hope that the market will go up by a certain percentage each year. They may use fancy words and phrases like the future is looking really good for us, the new product is ready to take the market by storm, and we have a strong team of experts who know what they’re doing.
In addition, we just bought a company that will significantly help us take the market by storm. Creating a plan isn’t profitable for marketers because it takes too much time. Instead, they go for the quick money by creating excitement about a product that has not yet been created or developed.
Rather than try to sell an existing product to people who need it, they try to create an image of a product that hasn’t yet been created or even invented.
Are Blockbusting And Panic Selling The Same Thing?
No, the cause of blockbusting is usually panic selling. Also, blockbuster companies have a catchy name and create excitement about their products. Panic selling is the act of selling stocks of companies that are declining rather than buying more of the stock, which in turn causes it to decline more rapidly.
It doesn’t matter how much hype surrounds a particular product, an investor usually shouldn’t sell shares of that product on the first day for more than a 33% profit.
However, people tend to panic when they sell their shares of a company that is actually profitable. Instead of selling at the top, investors hold on to hope and wait for the price to drop before selling their shares.
Why Is Blockbusting Bad?
- Investors who didn’t sell when the price was high end up buying the stock at a much lower price, but with hopes of making money from it. However, investors who didn’t sell when it was low still have shares worth less than what they bought them for.
- People who panic sell are usually desperate to sell their shares because they don’t know when or if the price will rise again. They have been seeing the same sort of news about their particular stock and become bored or overwhelmed by it.
- Investors who panic sell can be emotionally insecure. When the price goes down, they feel as if their entire investments have been wiped out.
- Blockbuster companies rely on hype to get the attention of investors, i.e., they create excitement to make the price go up and they use it as a means of communication with the public and investors. This means that when the price falls, it’s more difficult for the company and its investors to communicate properly through marketing campaigns.
- Investors who panic sell lose money because they sell their shares before the price has dropped enough to get a good rate of return.
How Did Blockbusting Work?
To get the public excited about a company and its stock, marketers came up with the idea of blockbusting.
- As more and more people started to sell their shares of a particular company because they were concerned about its future, the price would rapidly decline. Then, more investors would panic because they felt they were missing out on a lot of money by not selling their shares first.
- Blockbuster companies began to experience this sort of blockbusting at a much more rapid rate than the previous year. In fact, the number of them increased from 35 in 2004 to 53 in 2005.
- Marketing departments became more and more creative, leading to new and unique ideas that were meant to increase hype about their products. For example, in 2005, two companies each had a pink Lamborghini as part of their advertising campaign.
- Though some companies may have tried to prevent blockbusting, they couldn’t really do much about it. Most of this blockbusting didn’t even involve companies that were themselves trying to do something new and original. They were really just using other companies’ techniques and habits against them.
- Many marketers ignored huge spikes in share prices, thinking that their competitors would be able to counter the hype without them feeling the need to issue any sort of official statement on the matter.
- There were a few companies that issued an official statement on blockbusting. For example, when it became obvious that the company’s stock was being block busted, the president stated that he thought it was unfair for people to be selling shares at lower than what they had bought them for.
What Was The Purpose Of Blockbusting?
The purpose of blockbusting was to get more people to sell their shares in a company that had been enjoying a high share price. By getting investors and consumers to panic, they could decrease the number of shares and make it look as though the stock had been overvalued.
As it decreased in price, people would start buying the stock because they believed it would go back up again because other investors were buying up its shares.
- Blockbuster companies primarily used blockbusting to get people to buy more of their stock. Also, companies began to panic to drive down their competitors’ share price, making it look as though the competitor was becoming more unstable over time.
- The hype surrounding new products and services makes it difficult for investors to understand how profitable a company is. Investors also become bored and frustrated with the advertising that they see daily, so they are more likely to sell their shares when they feel as if they might be losing money on them.
- The people who panic sell because they feel as if they are losing money on their shares are usually pretty disgruntled or insecure. They know that the stock will likely go up again, but they just don’t know when.
- Some companies use blockbusting to make people want to buy their product over a competitor’s. For example, a company may create an advertisement using other companies’ techniques and habits to scare off its competitors and make it seem like the competitor’s product has no value.
How Is The Act Of Blockbusting Regarded By Maryland Law?
- As unethical, and illegal by law, according to Maryland law. Blockbuster companies are not allowed to use scare tactics to get people to buy their stock or sell a competitor’s stock.
- Blockbusters can no longer use trashy headlines and rumors to drive down the price of a competitor’s stock.
- Legislation was passed because of a case that involved Bally Total Fitness Corp. and Profit Technologies, Inc., in which both companies didn’t even get along with each other all that well.
- The legislation is supposed to protect the general public from this type of deception in the future, especially if it is used to deceive them by a company that holds itself out as having honest intentions. This is why blockbusting is not legal in Maryland but was in other states as recently as a few years ago.
Does The Federal Fair Housing Act Prohibit Blockbusting?
Yes, it does. The Federal Fair Housing Act prohibits blockbusting, which is basically the act of trying to get someone to sell their house quickly by acting as if the neighborhood has lost its value or its residents are not safe.
This type of blockbusting was used a lot in Baltimore during the mid-90s because of its proximity to New York City, which had worked for such an idea for quite some time.
Also, the act of blockbusting is actually illegal by Federal law.
- Blockbusting was outlawed by legislation that was passed in 1989 and amended in 1998 with more stringent anti-blockbusting penalties.
- The federal government is taking enforcement a bit more seriously now than before, so this blockbusting act is not something you would want to get caught doing or trying to do, for that matter.
- C. Some states have also passed anti-blockbusting legislation, even though the FHA did not require it.
- However, many people still believe that blockbusting is not a problem that the Federal government needs to spend any time dealing with.
- Someone who tries to blockbust would face fines of up to $10,000 per offense if found guilty in Federal court.
Is Panic Selling The Same As Blockbusting?
The reason that panic selling and blockbusting are so similar is because they both involve the same basic idea of trying to make people sell their stock for a lower price than what it is worth already. In many ways, this makes them similar to insider trading as well.
- Some people have the habit of trading in other people’s accounts without authorization because they worry that the person who owns the account won’t get rid of their stock fast enough.
- Sometimes, people will get annoyed if other people are buying up their stock and driving down the price.
- Both blockbusting and panic selling can be considered unethical for many reasons, but blockbusting is generally used in a lot of bigger deals that affect the lives of many people.
Is Steering The Same As Blockbusting?
Steering is not the same as blockbusting or panic selling. Steering is the act or a way of trying to convince someone to buy or sell a house in a certain neighborhood because of its racial makeup.
In other words, if a white person wants to sell their house, they will try to steer black people away from it so that it won’t be bought by members of this race or ethnic group.
Some companies use panic selling to try and persuade consumers into buying their products over another company’s product.