A StockHouse Investor Protection Special Report: 9 Red Flags that Identify Online Message
Board Scammers
Miami, FL, May 4 /SHfn/ -- The continued explosive growth of online message boards often
victimize the novice investor. Notorious posters cloaked in the anonymity of a chat forum can
easily deceive many first-time visitors to message boards. The StockHouse.com ©
RapidResponse team has identified 9 Red Flags that may help prevent being misled.
Who is the name behind the message your are reading? In many cases, you will never know.
Dishonest posters can fool even the "respectable" message boards. One leading message
board claims their $50 registration fee eliminates such dirty tricks, but many stock
manipulators get around this by sending in $50 money orders, instead of surrendering their
credit card numbers. The checklist below offers some of the ways you can spot manipulative
posters. The list is more of a rating system than absolute con-artist detection list. The greater
the number of violations by a poster, the more likely he or she is promoting the stock for
some ulterior motive. One or more violations do not necessarily mean the poster is a stock
promoter, but continued violations over many stocks may identify someone as such a person.
THE RED FLAG CHECKLIST
1. Someone who hyper-posts on only one stock. During the promotional run of that stock, he
may be posting between 8 and 20 messages daily (sometimes more). He will promote for
only so long until he has exercised the stock options that he has been paid to promote the
stock or until his cash contract with the company expires.
2. Someone who uses multiple identities. This is hard to detect. Generally, the poster will run
with one identity until he has become despised on the message boards. Then, he will register
again with a new identity. If one carefully studies such an individual, it will be found that he
posts repeatedly about the same set of stocks, or just one stock. He will post during the
same time each day or night. His messages will commonly be the same length. His writing
style will be similar and he will use the same phrases or key words in his messages. Often,
this is the hired promoter. He is paid to post on message boards throughout the Internet,
either in cash or stock options.
3. Someone who repeatedly attacks or belittles others on a stock's message boards. This
goes beyond the simple heated debate with one or two members who disagree with him. If
you carefully read his messages, this promoter will sound like he is fighting for his life --with
nearly everyone who challenges him. This might be the CEO or investor relations employee
for the company or it could also be a hired promoter.
4. Someone who emerges as the stock's moderator, or even the leader of the discussion
group or that stock. This person is different from someone who has a genuine fundamental
understanding of the company and who is also helpful. A promoter/leader will diligently
answer to virtually every negative comment made on "his" message board. He will also
cheerlead every positive comment and constantly make an appearance on the message
board to "show" he is still the boss. Again, a paid promoter.
5. Look for the poster, with a short history in their member profile, who suddenly shows up
during a stock runup, and appears to know "all about" the company. This person is different
from the excited investor, who just bought shares in the company and is enthusiastic about it.
The impostering poster hints at "inside information" and quickly name-drops some connection
to a company insider or employee. While the "excited" investor may rave about something an
investor relations employee told him, the imposter hints at important, but as of yet
unannounced, development(s) that may impact the stock price.
6. Someone who is nearly always the first to respond to company developments.
Occasionally, someone else will beat him to it. Otherwise, he's first or a close second almost
every time. Paid promoters are paid to be on their toes. Commonly, he will positively spin the
news, to soften the blow of less than good news or to make good news appear better than it
actually is.
7. Someone who continuously hints at upcoming company developments, unreleased
company news, unannounced contracts and forecasts discoveries in natural resource
exploration stocks. Where did he get his information? Usually, he is the one who starts the
rumor and might often state that he heard it from someone else. Yes, he did - a company
insider. This is where the old clich‚ (Buy on the rumor; sell on the news) comes from: the
company insider who leaked the news. Paid promoter or company insider or long-term and
trusted follower, who is also a significant shareholder.
8. Someone who hypes the company during the runup and then "changes" his mind and
begins attacking the company, the company insiders and the project. This individual is
different from the enthused investor who realized he was just scammed. That person is less
controlled in his emotions, which is evident in what they write in their postings. The hypester
carefully controls his statements, both up the chart and back down. On the way up, he may
help the stock move higher by adding to the cheerleading, so that he can build a substantial
short position. Once he changes his mind, it stays changed, though. The "excited" investor is
confused and sounds it, when you read his messages. The latter hasn't the slightest doubts
about his position on the company.
9. Someone who goes out of their way to find bad news about the company and makes a
"case" out of it. These individuals might include ex-friends, ex-family (divorced) and
ex-employees, including ex-promoters. Such people don't just post a single negative item.
They either take one negative and make it look like "the sky is falling" or they continuously
bring it up. That an individual makes frequent appearances to vent their spleen is the clue,
which gives them away. Disgruntled investors usually move on and don't want to be reminded
of their bad investment. One way to cross-check the message board postings to determine if
there is an escaped fraudulent manipulator at large is to compare his posts against the
company news releases. The fraudulent companies generally amplify their slightest
achievements and play down their failures. Companies with a history of failures - running a
company into the ground, never achieving anything of merit and diluting their market value
through the repeated issuance of new shares via private placements or secondary offerings -
tend to hire the most egregious and unscrupulous promoters. The above 9 Red Flags are by
no means a complete list of warnings signs and should only be used as guidelines to protect
yourself from fraudulent messages and posters. |
