Pump and Dump stocks, as opposed to Tier 1 pink sheet stocks, are speculative companies whose stock prices are generally getting pumped. Pump and Dump stocks often revolve around hyped stories that might attain a cult following. These companies may look appealing on the surface yet may still be subject to substantial doubt. Stocks in this list can allow the long or short investor to take advantage of quick spikes or declines in stock price that can be directly correlated to the cycle of a promotional campaign. Once in a while, the GeoTeam finds a legitimate company that may be more than just a hype play.
Common Characteristics Of Pump And Dump Stocks
To identify pump and dump stocks, GeoInvesting regularly checks against a list of characteristics that can be associated with pump and dumps.
- Recently completed Reverse Take Overs (RTO) can lead to pump and dump findings;
- Flat liners. Flat historical price charts that just broke out or look like are about to break out to an uptrend can signal a pump and dump. This is very important and possibly the biggest clue that a pump and dump is forming;
- Increased press release flow is often seen with a pump and dump;
- Public announcement that the company has just embarked on an IR campaign;
- Knowledge of mass email alerts by pump and dump outfits;
- Unimpressive websites or ones that say coming soon and never materialize can often be associated with a pump and dump;
- Over 50 million (preferably over 100 million) shares outstanding. This is a shoe in for a pump and dump due to ample liquidity. However, we still should not ignore smaller share counts. We just have to realize that less liquid a stock may be, the riskier the trade. Keep in mind that at some point the share counts will increase as dilution almost always settles in either from new capital infusions or from existing convertible securities;
- Stocks with “sexy” stories or names are shoe-ins for pump and dumps;
- Of course, no revenues–Development stage companies may be at times synonymous with pump and dumps;
- Exaggerations of relationships and too good to be true revenue and contract announcements;
- If a company is associated with the usual suspects of individuals and management teams known for being part of past pump and dumps, the higher the propensity for the stock to qualify as one;