Pump and Dumps: The Race to Zero

Ian Cassel Blog, Pump and Dump 1 Comment

Pump and dumps have been going on since the beginning of the stock market and are most prevalent amongst penny stocks.  The hard mailer is one of the most used avenues to pump a stock. The company themselves, affiliates, or large shareholders pay millions of dollars to mail out glossy 20 page reports trying to dupe investors to buy the underlying stock so they can sell their positions or conduct a financing. Just like gravity, when a hard mailer pushes a stock up, the buying eventually ends and they always crash back down to Earth.

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Here is a performance matrix of every hard mailer I’ve received at my home over the past 18 months. As you will see, time is a pump and dumps worst enemy. Overtime many of the companies that were involved with hard mailers ended up going to zero.

Many hard mailers look like this one below, which I received on October 25th on North American Oil & Gas (NMAG). You will see in the disclaimer below that Tobin Smith received $20,000 for putting his face on it, and the remaining $770,000 towards to the publication and distribution.

It’s unfortunate that in many cases an investors first entre into the microcap space is from unscrupulous sources such as a hard mailer or some pump and dump website. It’s important for investors to know that only a small percentage of microcaps indulge in such unethical tactics. Many microcaps have great businesses, management teams, share structures, and conduct themselves with integrity.

At MicroCapClub, most of our members make a living exclusively investing in microcap stocks. If you want to find out how we do what we do, check out some of our educational articles [HERE].

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