Anyone know the steps necessary before a company can buy a shell and do a pump and dump?
I have found these steps and they seem to be right. This does not refer to a reverse merger but very similar steps?
Let me know if there is another list of steps or website that contains this process....
The Ten-Step Guide to Creating a Pump and Dump
Option 1: Start from scratch
1. Create a corporate shell.
2. Use a Regulation S placement to sell stock to a few close associates. These ‘seed’ shareholders often pay just a few thousand dollars for the stock.
3. Do a reverse merger with some company with a promotable product or technology (the best companies have cool new technology in the development stage so they can be hyped without worrying about actual sales or profits). You can buy some technology that doesn’t work but sounds like it should to laypersons for a couple hundred thousand dollars or a chunk of shares in the public company. If you have no good ideas and have no connections, start your own mining company, lease a mining claim for $10,000 and pay an engineer $5,000 to say it is worth digging.
4. Fund the company by selling convertible debt to insiders / friends. Bonus points are earned for using front companies based offshore to hide the identities of the beneficial owners of the debt.
5. Do a large forward split to get the share count into the tens or hundreds of millions. (These first five steps can take up to a year or more in order to ensure that all your shares are free-trading and not restricted shares.)
6. Contract a stock promoter to promote the stock at an arbitrary price ($1.00 per share or thereabouts is common for big promotions).
7. Sell some shares at a pre-arranged price in large blocks to the promoters or friends. Use these sales to create a bit of a price history at a high price.
8. Install a friend or compliant stooge as the company’s President/CEO and make sure that he follows your instructions.
9. Have the CEO/President start putting out press releases to coincide with the start of the promotional campaign. This way people unfamiliar with pump & dump campaigns will interpret the new volume in the stock as legitimate investor interest (and not the blatant stock promotion it is). It is much harder for the SEC to go after promoters who lie and exaggerate than it is for them to go after corporate officers who lie, so stick to verifiable facts and positive opinions in the press releases.
10. As soon as the promotion starts, start selling your shares on the offer and let the stock slowly uptick to keep traders interested. Because you controlled the company from the very beginning, all the shares being sold belong to you and your associates. Selling shares slowly while letting the stock go up slowly seems to be the most effective way to sell the largest number of shares. Careful manipulation of the price action by providing bid support is also important (it is also illegal but very hard to prove).
