Ever gotten a hot stock tip in your email inbox, supposedly letting you know about some undervalued and unknown company that is on track for a big break? Don’t think it will be your ticket to wealth. More likely than not, you’re going to lose your money!
Beware about getting tips for hot penny stocks to watch
Earlier this week, I received the following email:
Everyone expects this company to go higher! New WILD Alert Tomorrow. Last Trade: .09 Short Term Target Price: 0.9 Trade Date: Fri May 27 Sym: GR YN Company: Green Hygienics Holdings, Inc. It could rally in bad economy. This is starting to take off!
The ‘From:’ part of the email was left blank, so this came to me completely anonymously. But I immediately recognized this as a classic ‘pump and dump’ scam.
With pump and dump scams, the frauds putting out this drivel are trying to entice people to invest in unknown companies. They’re trying to ‘pump’ up the stock’s value.
But what they don’t tell you is that they are usually primary shareholders in those companies! Some company owners and CEOs don’t even know their name and stock ticker symbol is being commandeered by criminals in this manner.
The crooks use blogs, emails, message boards and social media to tout some lightly traded public companies that supposedly have promising new technology or are otherwise on track for a big break. The pitch is that you can get in on the ground floor of this hot opportunity, which is usually a penny stock.
Unwitting beginner investors get these ‘hot stock tips’ and buy the worthless stock, which drives up its value. Then when the valuation is high enough, the crooks ‘dump’ their shares by selling them to make huge illegal profits.
The value collapses as soon as it becomes clear that the company isn’t as hot as it seemed, and the promoters get away with potentially millions of dollars.
Back in the wake of the BP oil spill, there were hot penny stocks being touted for companies that supposedly had a new technology to clean up oil spills.
This kind of thing is so prevalent that The Wall Street Journal says one out of every six emails in the United States are now for these phony stock pump-and-dump scams!
Don’t ever believe a hot tip that somebody slips to you, thinking it will be your ticket to wealth. More likely than not, you’re going to lose your money.