PUMP AND DUMP

"Pump and dump" is a form of microcap stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements. A stock price can be artificially inflated simply by vigorously advertising and pitching it to potential investors with TRUTHFUL information and a rosy commentary.

Here's part of an email that I received on March 2, 2010. Whoever was pitching it had some sort of special interest in doing so. They had apparently purchased my email address from a list. People don't go to the trouble and expense of sending out mass emails just to be nice and give free advice. I don't know if this example below is a pump and dump but not surprisingly within less than a year Li3 Energy's shares had declined 86% from 98 cents to 11 cents. Scarcely traded micro-cap stock prices can easily be manipulated. Also Peter Lynch, who ran the highly successful Fidelity Magellan Fund from 1977 to 1990, has said that he was 0 for 25 when investing in companies that had no revenue but a "great story". So if you are thinking about investing in microcap stocks, that about says it all.

 

Another (alleged) pump and dump that I received came in the form of an unsolicited mailed 16-page newsletter. Oddly this newsletter had a $21.65 price tag printed on it, yet they sent it to me for free, and inside this newsletter I found absolutely NO mention of how to pay to sign up to become a subscriber -- a sign of something fishy and deceptive. All 16 pages were devoted to pumping the microcap stock GUNP.OB, with the exception of a small print legal disclaimer at the end explaining that the publisher was paid a whopping $600,000.00 in order to enhance public awareness of Gunpowder Gold Corp! Case closed: this is a conflict of interest! Lest any grandmas thought this was an unbiased, pure research newsletter and bought into GUNP.OB, I feel sorry for them. When I received this printed "newsletter" on January 17, 2012 GUNP.OB traded at $0.47 per share. Well it's now 16 days later it has lost 83% of its value. Go figure....