That is one great summary although I see CD's and S-8 stock as two separate issues...but the results are the same.
"What is far more common in penny trash issues is the orchestrated pump and dump, in which the company finds a discount CD issuer, and issues S-8 shares for "consultation" services. The consultant turns around and hires fax blast, newsletter, and message board pumpers, and in concert with management issues a series of breathless PR's that are long on promise and short on substance. The CD holder then sells into the price and volume spike with the assurance that he can convert the debenture to cover the short sales. Ultimately, the effect of the new CD shares flooding the market tanks the price, but the company has their money-to be spent by and large for management salaries and perks-the CD holder has his guaranteed profit, and the retail shareholder has been fleeced again.
The cries of naked shorting then begin, in the hopes of keeping the sheep in the pen."
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