I just wrote this post about a stock market fraud you need to be aware of - the pump & dump scheme on penny stocks. If you come across SMS/Social media tips peddling penny stocks, do share it below, we will alert all our customers.
Do read this post.
In a pump and dump scheme, the operators (people who hold the majority of the shares of the company) of these penny stocks move the price of the stocks up and down at will. To move the price up, the operators start placing small amounts of buy orders at higher prices incrementally, and since they own all the stock, the price starts moving up. Once it has moved up enough to make retail investors greedy - a buzz is created through SMS, social media, and online forums to push the price up even further. This is when typically most people get sucked into by the stock and also when the operator starts selling the stocks. As soon as the selling is done at these high prices, the buzz stops and the stock falls back to the price where the upward journey started without giving anyone an opportunity to exit.
Some examples of stock tips and the movement in price post the tip. Also, check out the sent person on the SMS, trying to fake that it is a reputed brokerage firm.
- Ejecta marketing
- Jtaparia project
- Bail leasing and finance Co
If you come across SMS/Social media tips peddling penny stocks, do share it below, we will alert all our customers