Adikann Goldfields ADK (VSE) Message Board

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Gold/Mining/Energy : Adikann Goldfields ADK (VSE)

ADK 0.910

0.0%

Oct 2 5:00 PM EST

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To: Tek Manhas who wrote (741)	2/8/1998 8:06:00 PM
From: Mr Metals	Read Replies (1) of 826

One more piece of advice. Getting Dumped On The road to successful small-stock investing is littered with hazards. The unpredictable development of smaller companies is but one of many potential fundamental risks for investors. But small-stock investing involves another set of risks that have nothing to do with sales and earnings growth or debt ratios. Smaller stocks are particularly susceptible to market manipulation by corporate insiders and affiliated parties, accomplished in a number of ways. Among the most notorious is the pump-and-dump, where these insiders pump up the stock price and dump the shares at a big profit - while individual investors take a big fall. In its ugliest form, unsuspecting investors are compelled to purchase thinly-traded and/or low-priced stocks through aggressive marketing and advertising. These promotions are often disguised as legitimate, unbiased research with a stated or implicit buy recommendation. (See Stock Detective Guide to Pseudo Stock Research and Phony Financial Reports.) The subtlety and professionalism of these promotions may vary widely, but the purpose is nevertheless clear and intentional: to benefit a small number of large shareholders at the expense of a larger number of small shareholders. Stock promoters may be hired to help a company repatriate shares owned by venture capitalists or other early investors seeking to cash in on their investments but requiring additional liquidity to do so. Public relations firms may be hired even after an IPO to help boost liquidity and relieve the underwriter of its inventory, especially in small IPOs (under $10 million) where there may have been only one or two selling firms. Legitimate businesses sometimes have legitimate reasons for selling their stock. But far too often, the benefitting parties in these market manipulations are not legitimate venture capitalists but opportunistic stock scammers attempting to turn millions of shares of cheaply-acquired paper into cold, hard cash - courtesy of unsuspecting individual investors. The mechanisms and manifestations of these scurrilous schemes may vary but typically include a burst of stock promotion followed by a large selloff of free-trading shares. Mr Metals

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