Penny stocks by their nature lend themselves to multiple scams and schemes to part the unwary investor of his/her hard earned money. Stocks that are termed penny stocks or micro caps are usually thinly capitalized, with net worth of a million or so. With those parameters, these stocks become the favorite vehicles for multiple schemes some of them reaching far back in time.
A recent re-issue of a classic book, Reminiscences of a Stock Operator that was written in 1923 and re-issued over the years. Interestingly enough the author talked about schemes and scams some of which are still perpetrated in today's" boiler rooms." The other point that was loud and clear was that the average investors greed and willingness to believe misinformation was as prevalent today as it was prior to Wall Streets collapse in the 20's.
The following are a few of the ever popular ways among the scammers to fleece the unwary investor.
Everybody would like to be in the position of having reliable information about a company that was not generally known to others. But Insider Information that is questionable or downright fraudulent is not good news and can be very difficult to recognize.
Number of paragraphsNew Testament Greek for Preachers and Teachers; Coffee Break - Refugee - Hospitality - Occupation: Visual Art and; Anthropology of Religion: A Handbook First edition by Glazier,; Allen, Janet Applebee, Arthur N. Burke, Jim Carnine, Doug's; Fuzzy Logic and its Applications to Engineering, Information; Fox, Stuart's Laboratory Manual Human Physiology 14th (fourteenth); The Regulatory Function of European Private Law by Cafaggi, Fabrizio
For example, information which the scammer has falsely developed as coming from an inside source within a company that could lead to either a gain or loss in the value of their stock. This false information is disseminated through spamming emails, faxes, information posted on the many chatrooms and forums dealing with investments and also by using paid promoters. These latter are the ones who "leak" information on chatrooms about a company. They urge the unwary reader to buy before the stock runs up to a higher level. This then becomes the classic "pump and dump." The more interest in the stock, the more buying, the more the price begins to move up and thus fuels more buying as others rush to get in. At some point the price can not sustain the higher level and loses the floor which triggers a sharp sell-off. Many investors are caught at the high and frantically try to sell their position. By the time most investors are out of their position, the sharp operators have been long gone and are setting up their next scam. It worked well in 1923 and works well today in 2007. Investors haven't changed much.
A New Variation on the old Pump and Dump. This time an answer machine becomes the vehicle for the false information.
The "boiler room operators" call and leave a message on your answer machine that was purportedly for another person. A clear case of a mis-dialed phone call - or was it$%: What you hear goes somewhat like this:
" Hey Joe pick up if you are there. Listen I don't have much time but I wanted to tell you that company XYZ has definitely been sold. The news will be released tomorrow. Now is the time to buy. The stock is only trading at $$$ and is gonna be worth big bucks when the news hits the street.. I gotta go before someone hears me. I'll call you later when I can. "
Well what would you do$%: Remember my comment about the average investors greed and willingness to take chances$%: How many fall for this version of the "pump and dump"$%: And of course never report it because they heard what they thought was mis-dialed insider information. The motivation here is greed and fear. Fear that you could get into trouble because of the insider information. And greed because who wouldn't like to pick up some extra bucks from someone's error.
Fundamentals of Biomechanics: Equilibrium, Motion, and Deformation; Staff Services Analyst (Career Examination Series Volume C-3810); The Urge to Jump; The 2007 Import and Export Market for Mounted Loudspeakers in Sweden; The 1967 Scofield Study Bible, KJV, with Word Changes; Electricista de mantenimiento; Historical Dictionary of Ancient and Medieval Nubia (Historical; You Lost Me: Why Young Christians Are Leaving Church . . . and; Assessment, Measurement, and Prediction for Personnel Decisions by
Finally, consider the "off shore scam." This one has been around for awhile too. This is a scam that usually involves a shady company that sells unregistered stock to foreign marketers that has been deeply discounted. This stock is then sold to investors in this country at much higher prices and the differences are split between company insiders and the foreign marketers. The end result is the same as cited before, the share price can sustain the higher prices for a short period of time before the volume of shares and the stock price reaches a peak. The stock price then collapses leaving the investors with little to show for their money.
These are just some of the variations in stock market scams and schemes there are others. Some of those are more subtle then the outright nefarious "pump and dump" schemes. All are guaranteed to relieve the unwary investor of some of his money. Do we learn from these examples$%: Only you can answer that.
Most recent messagesColor Atlas of Ceramo-Metal Technology Vol. 2; Invitation to Psychology, MyLab Edition (with MyPsychLab Pegasus; Nuclear Magnetic Resonance Spectroscopy 1st edition by Nelson, John