Penny Stock Scam Spam Emails - risky and annoying

I get about twenty or thirty emails a week pushing some penny stock. These scams are losing bets and no one with limited investment experience should invest in them. First a little about the penny stock market. Penny stock is a term used to describe stocks that generally trade below $2, have thin or no market and whose trading is fairly unregulated. Most are defunct companies that used to be listed on NASDAQ and lost their official listing due to deficient financials. These stocks are losers and because of the limited market for these securities they can be subject to manipulation.



Enter the email scammers. Overseas email hype artists take advantage of the thinly traded issues and turn them into vehicles to commit fraud outside of the regulatory arm of the US government. They do this by finding a suitable thinly traded penny stock candidate.



They quietly purchase as much of the penny stock shares without causing rapid price acceleration. Then they begin spamming. I do not know their success ratio but it only takes a few suckers for them to start unloading their shares at higher prices. The stock begins to move up due to higher demand and then others take notice. They say to themselves "hey that email was right...it is going up" if they are lucky they will stand on the sidelines and not let greed get the best of them. Eventually the scam artists sell all their shares at a hefty profit leaving the duped investor trying to make a buck holding the bag. As the hype fades the stock price rapidly deteriorates and the investor losses big time or is left with a bum investment.



For more info: Kiplinger.com, Spamnation, Realy Hot