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Saturday, July 29, 2017 8:28:01 AM
Misleading information: Whether through a free e-mail newsletter, press releases, or a comment on a message board, these shady promoters know that they don’t need to trick everyone, just a few unwary investors is enough. They may stretch the truth, or flat out lie, to make a penny stocks company look extremely compelling.
Focusing on (ridiculous) potential: Instead of talking about how a company is almost bankrupt, or generates no revenues, the promoters focus on how its product — an engine that runs on gravity, a cure for that major disease — could change the world (even if it borders on the ridiculous). Inexperienced investors may fall for the promotion and think that the shares are a great investment.
Pump-and-dump schemes: A common practice with penny stocks, pump-and-dump schemes involve dishonest promoters who buy inexpensive shares in nearly nonoperational companies. The promoters talk up the shares and generate buying interest in the stock. That demand can drive the prices higher, until the characters behind the scheme sell all their shares and take their profits. Without the promotion, the stock collapses back toward the real value, usually near zero.
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