Pump & Dumps Schemes in the Stock Market continued..jp
1. SPAM EMAIL
A legitimate company will never send you spam email. First of all, spam is illegal. Secondly, all the information that they would need to get out to the public is disseminated though press releases. If they need to make themselves aware to the public, they do it through a number of legitimate campaigns such as advertising, technology fairs and the like.
2. STOCK TOUTS
Sometimes emails received are from a free subscription based touting service. Sign-ups are how these touts get around spam laws. However, the intent is the same: to con you out of your money. These touts are paid by the people intending to dump their stock on you and usually say so in the fine print of their promotions. While their names are constantly changing currently subscriptions are available to GrowingStockReports.com, EpicStockPicks.com, Eastwind Research, Penny Stock Alerts and dozens of others. These sites often tout the same stock and there is a good reason for that. Touts usually own many touting sites and promote under various names in order to give the perception of a wide following for the particular stock they are touting. StocksGoneWild.com, and EpicStockPicks.com are sisters as are QualityOTC.com and BestOfPennyStocks.com.
MoneyTV with Donald Baillargeon is an example of another touting service paid for by insiders wishing to promote their stock under the perception of a TV interview show. The fact is that these insiders pay to be on this “show” and just about the only place you’ll see the interview is on MoneyTV’s own website. The insiders will usually disseminate a press release bragging about how they were interviewed on MoneyTV in an effort towards self-importance.
3. THE BACKGROUND OF THE OFFICERS
There’s an old saying, “Once a crook, always a crook”, and that’s why it’s always a good idea to see who is running the show at the company. Verify his resume. Most companies at one time, will offer up the qualifications of the President, CEO or other officers. Check his past involvement with public companies and the past performance of that stock. Chances are that if he’s been involved with past pump and dumps or other schemes, you’re now looking at one that is heading in that direction. Also, it is a good idea to look into court records of the individual(s) involved and their previous companies and see if anyone has been involved in civil or criminal proceedings, especially for fraud.
4. MESSAGE BOARD CONTENT
Yes, forums such as investorshub.com, siliconinvestor.com or the Yahoo Finance Message Boards usually contain contributions from child-like posters who are there for no other reason than to try and convince themselves that they made a good investment. But you can often find the touts or Investor Relations guys posting anonymously trying to keep the pom poms shaking and keeping the naysayers in check. They know that people who are apt to follow spam email or stock touts probably consider these message boards to be research so they want to bluster about their great investment and brag about all the money they are supposedly making. These are the guys who call anybody negative or questioning the company a “paid basher” (there is no such thing) or the ones who claim they have done their “DD” ( due diligence) when there is really none to be done. When you ask what DD they did, they will be vague with their answer or give a non-answer, with a “Because I said so” kind of response. They are also the ones who offer up lame excuses for down days such as naked short selling (does not occur in the penny stock market) or MM (market maker) manipulation. They are also the ones who make bold and baseless predictions like, “This is an easy ten-bagger” (stock price will increase by a multiple of ten).
5. PRESSURE TO BUY IMMEDIATELY
Stock touts and other promoters will do anything to keep you from thinking, using words like, “You’ll miss the boat” or Everyone in the know is getting in right now” or “the entire street is talking about this stock”. They’ll even call you a fool if you “don’t buy right now”. Sometimes, you’ll get the same high pressure email over and over again, a clear sign that they need more volume in order complete all the planned insider sales. If you’re being given the “now or never” option, pick never and you’ll save money every time.. You’re being conned into participating in a pump and dump scheme.
6. CLAIMS OF BREAKTHROUGHS
Beware if the company claims to be an industry leader (do you really think a penny stock can be a leader in anything except possibly scams?) or has made a breakthrough discovery. A company with legitimate breakthrough technology is unlikely to be promoting itself on the penny stock market and will most likely have funding available to it within a variety of partnerships with major companies. These same companies will not likely be interested in dealing with a penny stock company. Also, question the likelihood of a fairly new company being the leader in anything other than schemes.
7. PRICE AND VOLUME UPSWING ON NO NEWS
If a stock’s trading volume and price per share, show a recent and sudden increase, there is a good chance that the stock is being set up for a pump and dump. Especially if it has been involved in one in the past.
8. FINANCIALS (or lack thereof)
A legitimate company will always make recent financials available, even if it is a penny stock that is not required to file financials with the SEC. And if there are financials are they fabricated? Would a billion dollar company be found within a penny stock? Also, compare the assets of the company to the market cap of its stock. Is a company with a couple of thousand dollars in the bank really worth $100 million?
9. ISSUED AND OUTSTANDING
If nobody will tell you how many shares are out on the street or if that number is disproportionate to the stock price (a billion shares of a stock trading @ one tenth of a penny for example, stay away. Chances are a reverse split is coming and you will be left with only a few shares worth a fraction of what you spent.
10. LOOK AT THE HISTORY
Look at the history of trading on the company over the last year or so. If you see sudden big jumps in share price and volume over a few days followed by just as quick drops in price and volume, chances are that the stock has been the subject of past pump and dumps programs.
11. CLAIMS OF SHORT POSITIONS
Sometimes you’ll hear that a particular penny stock will rise because of a tremendous short position in the stock and an upcoming short squeeze. We’ll say it again. Large short positions in penny stocks don’t occur because it is almost impossible for anybody outside of a market maker to take a significant short position in a penny stock. There has yet to be the penny stock that had a rise in price because of a short squeeze. Very few brokerage firms will allow you to short penny stocks and those that will encounter so many restrictions that it is impossible for a significant short position to exist.
12. CANCELLATION OF SHARES AND BUYBACK PROGRAMS
For some reason, dupes consider the announcement of a cancellation of shares or share buyback programs to be signs of authenticity of the insiders’ intentions. Insiders will announce these programs part and parcel with a pump and dump scheme.
The cancellation of shares, usually involving an insider’s return of some of his common stock to the company treasury, is usually meaningless because the insider(s) will never give back enough stock to relinquish control of the company. And as along as the insider(s) have control, they are free to reissue themselves stock under a number of schemes, once they have sold enough to put their control in peril. They also probably hold enough preferred shares, options and warrants to give themselves all the future shares they want.
Share buyback programs are usually announced with caveats such, “at the discretion of the board” and “from time to time”, meaning they might buy stock when they want, at the price they want and as many shares as they feel like. There has yet to be a significant buyback program carried out on the penny stock market.
13. RASH OF NEWS RELEASES
If a previously quiet penny stock suddenly has a rash of news releases within a few days, chances are it is the subject or about to undergo a pump and dump program.
14. RELENTLESS TOUTING
If you are receiving email after email you can be sure that the insiders have not sold enough stock yet. If a tout feels the need to send you more than one email, never mind several emails per day, then he is desperately trying to convince you to buy the stock. If there are several touts who have suddenly come up with the same “idea” then you know that the insiders are pulling out all the stops. The more touts they hire, the more money they’ve spent meaning they have that much more stock to sell you.
15. PROMOTIONS AHEAD OF AN SEC FILING
If the company is a reporting company, take a look at the SEC filings. Is a quarterly (10-Q) or annual (10-K) report about due, or worse overdue? If the promotions are beating SEC filings to the punch, chances are they are trying to get you to buy the stock before the bad news is about to be revealed. Bad news may include a significant increase in the number of shares outstanding or liabilities and/or a significant decrease in cash or other assets.
16. ANNOUNCEMENTS CONTAINING CAVEATS
Look for the caveats in press releases and SEC filings, which will may lead to an easy out of the announcement. For example, financing of up to x dollars. Anoption to acquire… Will buy back up to x dollars of stock from time to time at the discretion of the Board of Directors. Our favorite term is “best efforts”. If the announcement contains an easy out, chances are it will be exercised.
Facebook Group: JP’s Investment Round Table
Sources: Pumps & Dumps, Blue’s research Team
Blue’s Comments / JP
I will continue to share this info to all that want to read it..I can’t say enough on how important it is to arm yourself with knowledge before trading in any market with the Stock Market playing field..It is my hopes to help you to be a better Investor armed with good Information to help you to level out that playing field the best you can..thanks and good luck with you Investments..jp
16 Ways To Recognize A Pump & Dump Scheme