Submitted by IdeoLegis STAFF on Vendredi 2 août 2024 - 10:18
Cornering a market is an economic strategy aimed at acquiring all or most of a category of resources or goods that make up a market, in order to cause scarcity and drive up prices.
The term originates from the English phrase "cornering the market," which refers to manipulating a market by controlling the supply and sales to artificially create a situation of shortage in a sector, and then reselling the goods at significantly higher prices.
In the context of market finance, beyond immediate profit, the goal for those cornering the market is to push out all actors who have taken a short position on a particular security or commodity, forcing them to buy back their short positions to limit losses caused by this sudden and often massive influx of buying pressure.
If the operation is successful, the participant(s) may end up controlling the majority of the targeted assets, without necessarily being in a monopoly situation.
However, the act of cornering a market is not a natural market position but rather an artificial one. The assets and their potential derivatives are bought "at any price," exposing the participants to significant market risk.
The term "squeeze" or "squeeze out" is sometimes used, though it refers to a related but distinct concept. "Squeeze out" can also refer to a more specific legal procedure, which aims to force the remaining minority shareholders to sell their shares as part of a public tender offer.
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