The Spam Report

I’ve talked about stock scam spam elsewhere on this site, but it is worth running through it quickly here once again.

Maybe you have received these types of spam messages and maybe you have not. If so, you are probably quite familiar with the format: “This stock is set to explode” or “This stock is going to the moon” or whatever.

Most stocks these scam artists target are of the low-priced “penny” stock variety; stocks that are usually priced at $5 or less - most of the time, a lot less.

What happens is that the scammers behind these spam messages have purchased a very large number of shares in the stock they have targeted for a pump-and-dump scam.

Then they send out millions of spam messages with information about how undervalued the stock is and listing reasons that the stock price is about to rise dramatically. This is known as the “pump.”

As interest in the stock starts to increase and gullible investors start buying it up, the price does indeed start to rise due to the increased demand for the stock.

When the price is up to a certain level, the scammers begin to sell off the shares they have accumulated. With the large number of shares they have purchased, they probably do not have to wait for the price of the stock to rise all that much in order to make a nice profit. They are selling out easily as more investors line up to buy their shares.

The carefully-orchestrated sell-off of large numbers of shares by the scammers starts to deflate the price of the stock and by the time they have sold off all their shares, the price is likely in a free-fall to a level even below the price when the scammers purchased theirs. This is known as the “dump.”

The gullible investors who believed the pump-and-dump spam messages are left holding the bag and may never see the price of the stock recover to a point where they can recoup their investment.

Oftentimes, the company that the pump-and-dump scam targets is an innocent victim as well, and suffers the consequences of a stock price that has been battered as a result.

Like most other spam messages, a good dose of common sense applied will steer you clear of becoming involved with these scams and losing money on a bad investment.

Think about it for a minute. Why would anyone send out millions of e-mail messages to strangers telling them that the price of a particular stock is about to go up?

Is it because they are just good-hearted people who want others to take advantage of an opportunity to get in on a good investment?

If you don’t know the answer, please shut down your computer and throw it away or sell it to someone because you are a victim just waiting for someone to victimize you.