Wednesday, January 18, 2017 4:07:03 PM
There is this perception that the purpose of a stock promotion is to increase the share price. On the contrary, the purpose of a stock promotion is to increase trading volume. An increase in share price is purely a bonus to the insiders selling. In order for the pump and dump to be successful, bids must come into the market. While bidding up the stock is preferable, the insiders are more concerned about getting buyers to take their stock at any price. As they will never relinquish control, the insiders are always free to issue themselves new stock whether in lieu of payment for services rendered, by exercising stock options or warrants, or employee bonus programs. Therefore, the price that the insiders get for their stock is of secondary importance.
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