Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Microcap & Penny Stocks : IDCN - gold, garnet, etc. -- Ignore unavailable to you. Want to Upgrade?

To: Amir Feinsilber who wrote (1060)	8/21/1998 6:51:00 PM
From: BigTex	Read Replies (1) \| Respond to of 5908

Those questions are covered in Stock Market 102.Be sure and sign up. Class Dismissed.

To: Amir Feinsilber who wrote (1060)	8/22/1998 9:11:00 AM
From: Mr Metals	Read Replies (1) \| Respond to of 5908

STOCK MARKET 102:-( In the classic "pump and dump" stock scam, a company whose officers own large numbers of shares in its stock issues thousands or millions of shares at below-market prices, or even for free, to a promoter and affiliated brokers. The market is then artificially inflated through demand created by the brokers, using pushy, high-pressure sales tactics to lure unsuspecting investors. After a substantial boost in the share price, the insiders take their profits and the stock plummets. Novices often don't realize what is happening and cannot sell in time. The stock price may spiral back to its original levels, or even nosedive to zero. Meanwhile, the insiders line their pockets with the stock proceeds. The promoter perhaps will move on to the next deal but the company, after a reasonable interval, may recruit a new promoter to pump and dump the stock again. Some companies are merely stock churning vehicles, whose top officers have little interest in creating a real business with viable products or services. It is critical to understand that the vast majority of research reports touting a stock listed on the Nasdaq small-cap market or the over-the-counter bulletin board are no more than paid advertisements. In other words, the company has paid a fee to an investor relations firm to produce and distribute company profiles which, as the old song goes, "accentuate the positive and eliminate the negative." Even press releases should not be trusted. Like corporate profiles, press releases are designed to highlight favorable developments only. In fact, small companies often hire investor relations firms -- the same happy folks who create the biased corporate profiles -- to write their press releases! Additionally, the company that churns out a continuous stream of corporate profiles and press releases may be too busy promoting itself and not busy enough in building its business. The corporate profile and press releases may provide interesting reading, but they are no substitute for the company's prospectus and 10-K statement. For many small publicly-traded companies, little or no analyst coverage is available. The prospectus and 10-K may be the only unbiased, untainted information sources you can find. Try this: Unspecified claims of "major" developments, such as a "pending" acquisition or an "imminent" distribution agreement with a well-known company, are common distortions featured in scam stock promotions. Maybe an announcement is truly forthcoming, or maybe somebody made one phone call. But it makes a more exciting story to tell, and that's all that really concerns the unscrupulous promoter or broker. These firms may actually believe their pie-in-the-sky projections, but you shouldn't. Even projections from the biggest and most established companies should be viewed with caution. Outlandish projections from small, unproven companies are hardly worth the paper they're printed on. When it comes to small-cap stocks, trust no one except yourself and your sound judgment. You'll have no trouble finding small-cap companies that will trip over themselves highlighting their positive points; they're not so forthcoming in revealing their negatives The truth is out there -- but, like the conspirators in The X-Files, it is sometimes hard to find. 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. 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. 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. Sometimes the hyped company is a legitimate operating business with reasonable goals. Often, however, the actual business is little more than a clever story and a few questionable assets. By the way, a word of caution if you are thinking of "front running" a pump-and-dump promotion - i.e., buying and selling in tandem with the promoters in order to flip a position for a quick gain. Don't try to beat the promoters at their own game. Unless you are part of the insider group behind the promotion, you have no way to know when or how many shares will be sold ahead of your orders. Perhaps if you wait for the pump-and-dump to run its course, an actual opportunity stock may settle down and trade on the pure fundamentals of the business. Or, if it is a scam stock, the price could fall to zero. Are you willing to take that risk? Mr Metals