In the 1820's, few companies issued much information, if any to the markets. There was no regulation requiring it. 1825 was the first recorded instance of the New York exchange asking for information from a listed company – the NY Gas light Coy – so that the investing public might be informed, through the exchange, of details about the company. The Gas coy said effectively to 'stick it', as such information had no business being public.
These days more and more investors sift through the load of corporate information with a view to shorting the stock, selling the shares (without actually owing them), prior to having bought them. Obviously the trick is to buy them back at a lower price. Jacob Little is credited with having invented this process, around the year 1837.
Little would basically sell now, the stock he had contracted to deliver at some future date, say a year later. In the intervening period, he is betting the price of the stock will fall, permitting him to buy the stock back, just prior to delivery. (Today, any stock sold prior to buying, is done by first 'loaning' the stock from another who does actually own it – the same loaned stock must at some future time, be returned.)
No doubt Little worked hard prior to his delivery date, to ensure the price was actually lower than his original sale price. He is reported to have made good profits in the 1837 downturn, though it did not make him popular with other investors. This is the first instance of short selling 'bear' activity, the term bear deriving from the proverb "to sell the bear's skin before one has caught the bear". (B Mark Smith, Toward Rational Exuberance.) Little's practice was also not appreciated by other 'gentlemen members' of the exchange, who reportedly battled him long and often in an attempt to put him out of business. But the increasing activity and volatility of markets from this time on attracted others to the same game, who refined the process to incredible heights prior to stricter exchange regulation after 1873. We will meet some of them in the 1873 cycle.
Little did not survive the next serious downturn of 1857, which wiped him out. Ironically, it was not his activities that broke him, but the failure of others that owed him stock and were unable to deliver on their promises. He is pictured amongst the crowd in the painting Wall Street – Half Past Two O'Clock October 13 1857, hanging within the Museum of the City of New York.
