Pump and Dump (stock scheme)

A “pump and dump” scheme occurs when someone “pumps” the stock (such as an executive or an influential financial analyst in the media), the stock price goes up because of the pump, and insiders then “dumps” (sells) the stock for a large profit.
 
“For most promoters, the preferred scam is ‘pump and dump’—pump up the per-share price with hot air and hype, then dump the stock on duped investors for immense profits” was printed in the Wall Street Journal on February 2, 1988.
 
     
Wikipedia: Pump and dump
“Pump and dump” (P&D) is a form of securities fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price. Once the operators of the scheme “dump” sell their overvalued shares, the price falls and investors lose their money. This is most common with small cap cryptocurrencies and very small corporations, i.e. “microcaps”.
 
While fraudsters in the past relied on cold calls, the Internet now offers a cheaper and easier way of reaching large numbers of potential investors through spam email, bad data, social media, and false information.
 
(Oxford English Dictionary)
pump and dump  n. Stock Market (originally U.S.) a fraudulent scheme in which a person or company promotes a low-value stock in order to profit by selling shares at inflated prices; chiefly attributive.
1988   Wall St. Jrnl. 2 Feb. 1/6   For most promoters, the preferred scam is ‘pump and dump’—pump up the per-share price with hot air and hype, then dump the stock on duped investors for immense profits.
1996   Business Week (Electronic ed.) 27 Mar. 132   The dangers include misinformation and ‘pump and dump’ schemes, in which stocks are hyped by traders who then sell at the inflated share prices.
       
2 February 1988, Wall Street Journal (New York, NY), pg. 1, col. 6:
School for Scam
Fraud Is Rife in Market For Pink Sheet Stocks, Securities Officials Say
How Dynapac Sold Shares With Stories of TV Bingo And a Western Gold Mine
Rewards of ‘Pump and Dump’
By Bruce Ingersoll
(...)
For most promoters, the preferred scam is “pump and dump”—pump up the per-share price with hot air and hype, then dump the stock on duped investors for immense profits. Usually, they are in league with rogue brokers who, for a cut of the illicit take, tout the stock in sales pitches and create an artificial market for it.
 
30 January 1994, Bellingham (WA) Herald, “Beware: Information highway harbors finance hucksters” by The Associated Press, pg. A11, cols. 2-3:
Investigators reported two “pump and dump” schemes in which Canadian companies were heavily hyped on computer bulletin board services. Their stock prices tripled or more in a short period of time, then collapsed.
   
Google Groups: misc.invest.stocks
ccee - A Pump & Dump example?
dars
3/19/98
Well, you asked:  CCEE has an ROE of minus 310%.  Their profit margin is minus 75%.  Their current ratio is barely one.  They have floated 117 million of a possible 125 million shares.  They will probably issue the rest to stave off bankruptcy a little longer.  This company might survive, but would you bet the same $25000 on rolling snake-eyes?  If you really made this ‘investment’, then you have! By the way, even a shady broker is supposed to buy after he gets everyone else to buy, not before.  This looks like a classic pump & dump special.
 
OCLC WorldCat record
DEPARTMENTS - Consumer Notes - Federal Funds For Road Rage, Competition Comes To Cable, ‘Pump And Dump’ Scam
Publisher: [Washington, N.J., Consumers’ Research]
Edition/Format: Article Article : English
Publication: Consumers’ research magazine. 81, no. 11, (1998): 38
 
OCLC WorldCat record
Pump and dump : the rancid rules of the new economy
Author: Robert Tillman; Michael Indergaard
Publisher: New Brunswick, N.J. : Rutgers Univ. Press, 2005.
Series: Critical issues in crime and society
Edition/Format:   Print book : English
Summary:
Enron, WorldCom, Global Crossing - the mere mention of these companies brings forth images of scandal, fraud, and large-scale corruption. The authors argue that these scandals represent only the symptoms of corporate governance problem that began in the 1990s as New Economy pundits claimed that advances in technology were changing the rules
 
OCLC WorldCat record
Pump & dump.con : tips for avoiding stock scams on the Internet
Author: United States. Securities and Exchange Commission.
Publisher: [Washington, D.C.] : U.S. Securities and Exchange Commission, [2005]
Edition/Format:   eBook : Document : National government publication : English : [2005 ed.]
 
Google Groups: FISICA_TEORICA
Term of the Day: pump and dump
InvestorWords.com
1/28/08
InvestorWords.com | http://www.investorwords.com
Term of the Day: pump and dump
Monday, January 28, 2008
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Term of the Day
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pump and dump

An investment scheme, sometimes illegal, in which false recommendations are made concerning a stock’s future performance in order to drive share prices up. Investors making the false recommendations intend to sell their shares when the share price reaches a higher level.