Pump and dump – a guide to share trading tips

Apparently criminals are estimated to make £500m profit on pump & dump schemes each year.

Of an estimated 100m spam messages per week, share scams were 25% of this.

A study by the Office of Fair Trading found about 90,000 Brits lost an average of £5,660 on such scams.

In case you are unfamiliar with how it works, spammers buy stocks with a low share price (few cents per share), usually on small USA exchanges. They then spam people with news which is “guaranteed” to drive the share price up & then sell as victims drive the share price up.

Of course, this self fulfilling prophesy does indeed show a share price rise in the stock subsequent to the spam emails, before it “corrects”. So some people believe they were just unlucky and acted too slow on the unprompted share tip from the complete stranger that had kindly alerted them to this guaranteed winner!

The practice of “pump and dump” should not be confused with the issue of a broker research analyst’s note to their client base + prospects re how a stock is seriously undervalued and clients should buy it, which is completely different. 🙂

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