Boiler Room

I’ve watched four times and I still don’t get it!! Here’s the best I could come up with about how JT Marlin makes its money, using examples mentioned in the film: (1) Before companies like Farrowtech go public, they need to raise capital for the maintenance of their operations. So they approach an investment bank such as JT Marlin.

(2) JT Marlin helps the company out through bridge financing, which means they give the company the capital they want, as a loan.

(3) In return, JT Marlin receives discounted shares in the company. JT Marlin also has to find outside investors who will buy these shares, and thus use the sales revenue to pay themselves back.

(4) The investors JT Marlin attracts aren’t outsiders, but friends of the managing director, Michael. Farrowtech’s shares essentially belong to Michael alone, and he’s free to sell them to who he likes.

(5) Since the “investors” are fake, JT Marlin hasn’t actually raised any cash, so their newly acquired shares are worthless. Now, JT Marlin hires brokers to cold call people, exaggerate the value of their products (lying, basically). and encourage them to buy the Farrowtech stock.

(6) As the shares belong to Michael, he can fix the commission each broker receives for each share they sell. Fixing it at $2 or $3 entices the brokers to sell as much as possible, and brings out their sense of greed, but I think this is illegal, according to SEC and FINRA rules.

(7) The brokers’ hard work at selling Farrowtech stock creates artificial demand, which initially drives the share price up. Eventually it gets high enough so that JT Marlin can sell the shares on the stock exchange at a profit. This is a pump and dump. So far, so good. Here’s where I’m stuck. At around the 76 minute mark of the film, Seth Davis states that (1), (2), and (3) are fine “as long as there’s no connection between the investors and the firm.” What firm? The investment bank, or the company trying to go public? We know that JT Marlin’s investors aren’t outsiders but Michael’s friends. This suggests collusion and an unfair advantage, which is illegal, right? But what if it’s the other one, and the investors know the company trying to go public? So what? Additionally, numbers (1) through to (7) make sense for real companies e.g. Farrowtech was real in Boiler Room, and it offered JT Marlin microcap stock, by the looks of things. What about when JT Marlin bridge finances companies that don’t exist, like Med Patent? In the Med Patent case, whose shares did Seth sell to Harry Renard? My theory is that the Med Patent case is outright fraud. The brokers cold call people believing they’re selling stock (a la Michael’s speech halfway through the film). But all that actually happens once the brokers successfully “sell” Med Patent stock to a person, is that they’re passed on to the secretary, who takes down their bank details, and the monetary equivalent of the “purchased” shares is deducted from their bank account. This process is repeated across the trading floor every day until Michael is happy to move on. I’m unsure if the last two paragraphs are accurate. Can someone please give me a hand on nailing this once and for all?

It’s like IB, they “raise capital” and get a big cut of the proceeds. Since the company is shit, the fee is higher.

^^^^

No, it’s not. Have you seen Boiler Room ?

At some point it did involve selling shares of a company that didn’t exist.

Yeah I saw it about 14 years ago when I was a young’n thinking I was going to step into the market and slang shares around like a baller.

I thought they were raising capital for pinkshit companies, am I confusing that with the wolf of wallstreet?

here’s how it works.

JTMarlin games Farrowtech meaning it buys craploads of shares when its inactive and buys some in the early stages of the move. it then uses its brokers to stimulate demand so that JTMarlin and friends can get out with a healthy profit, selling to the chumps that Seth is talking to. commissions to JT brokers are high but not crazy in this scenario.

JTMarlin CEO creates MedPatent and insiders (JT and friends) own all of the shares. it then stimulates demand and forces the price up and eventually sells the shares to other investors as the stock continues to rise. when JTMarlin is all out of stock to sell, the only holders are retail and the stock eventually crashes. pure profit. this is why JT can give such large commissions on the trades b/c its 100% gain and the need to dump the stock is higher.

this is all illegal and why the SEC/FBI or whomever is a big part of this movie.

Boiler Room was mad homo.

  1. Bunch of faggie white guys acting hard. One does a line of coke and drops a N bomb in the first 10 min.

  2. Rap music is constantly playing in the background of this movie full of white guys. The only diversity is a fat black female secretary?! Seth quotes the late Notorious B.I.G. WTF! Christopher Wallace must be rolling in his grave.

  3. Ben Afflec is bragging about all his money. He dumps it on a car and has a huge house with nothing in it. Bunch of BSD ballers are watching Wall Street on a Friday night. Now das gangsta!?

  4. One of the bar scenes they are playing dice. I think this is the only time in history white boys played ghetto dice.

  5. The white jew in the movie calls his white coworkers nigger-rich.

  6. The white two jews are fighting over the fat black secretary. Since when do white guys chase the brown chocolate?

And so forth. This movie was just bad all around.

i think that was the point. they’re basically dumb school bullies making cash.

Here is a real world example…

http://www.sec.gov/litigation/admin/33-7853.htm

Fat black girl? Did we watch the same movie?

I don’t remember the movie that well – but I think it was just a penny stock pump-and-dump scheme?

Ben Affleck’s speech was one of the best I’ve seen in movie history.

thats what i thought

Agreed, You have to take this movie for what its worth. This is a great finance film.

Yawn, complete ripoff of Alec Baldwin’s speech in Glengarry Glenross (which is even referenced in the movie).

^ Not enough street cred for you?

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I thought they were raising capital for pinkshit companies, am I confusing that with the wolf of wallstreet?

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Both are based on Stratton Oakmont. Never seen Boiler Room but apparently was inspired by one of Belforts own stockbrokers who didn’t really know too much of what was really going on at the firm.

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Both are based on Stratton Oakmont. Never seen Boiler Room but apparently was inspired by one of Belforts own stockbrokers who didn’t really know too much of what was really going on at the firm.

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Boiler Room is partly inspired by Stratton Oakmont. The firm J.T. Moran was also used as a basis. (The most obvious being the name of the firm, J.T. Marlin). One of my first jobs on the street I reported to a J.T. Moran Alum. He wasn’t involved in the shenanigans and had to spend mid-6 figures in lawyer fees to completely dissassociate with the firm.

The below article from 2003 has some background on them.

http://libn.com/2003/10/24/boiler-room-2/