Concerns For Investors
Since many sub $5 companies are thinly traded, and especially those that trade for fractions of one cent, they are targets for price manipulation. For example, an individual or organization buys up hundreds of thousands, or even millions of shares, then uses web sites, faulty press releases, and e-mail blasts to drive interest to the company. Very often, faulty or misleading information is provided, resulting in investors buying shares in the underlying company. The increased demand pushes the price up, while the original individual or organization doing the "pumping" sells their holdings.
While such practices are illegal, and significantly less common in recent history, they are part of what has given the industry, and micro cap shares, such a bad name.
Another fraudulent scheme is the sale of chop stocks in which shares acquired below market under Regulation S are illegally sold to overseas or domestic retail investors.
While such practices are illegal, and significantly less common in recent history, they are part of what has given the industry, and micro cap shares, such a bad name.
Another fraudulent scheme is the sale of chop stocks in which shares acquired below market under Regulation S are illegally sold to overseas or domestic retail investors.
