Cynk Technology, a Nevada-based company with a business address in Belize, says it allows users to "buy and sell the ability to socially connect to individuals such as celebrities, business owners, and talented IT professionals." The company’s website claims to provide the contact information of famous people selling a file with email and phone numbers to the artist's agent, publicist, legal representative. The company has no assets no turnover nor revenue and a barely functioning website, IntroBiz.Com.
On June 16 the company’s shares were priced at a mere 6 cents, since then the price has gone through the roof and are now trading at more than $15, giving it a market capitalization of around $4.1 billion. Trading in Cynk Technology was stopped on Friday after its shares soared 25,000% in 16 trading days.
The suspicion is that this is a ‘pump and dump’ operation, something that’s illegal. The idea is to take a very thinly traded stock and drive the price up by purchasing some of it. People will note the price rising and some of them will (or might) purchase some, pushing that price up further. At which point sell out of that original stake and bank the profits. This is market manipulation and is frowned upon. But it is also very common.
An alternative thesis was hat this wasn’t a pump and dump at all, rather, it was only to give the appearance of a pump and dump. To explain: someone makes it look like Cynk Technologies is going through an obvious pump and dump scheme. The obvious way to do this is to actually run one: buy some stock, noisily and over time in a number of transactions and watch that price rise. So now the price has risen and the short sellers start to take a look. Obviously there’s good money to be made in shorting a pump and dump so they do. However, in order to short a stock you’ve got to go and borrow the stock you’re shorting. And those who have lent you that stock can demand it back as an when they wish. So if you’ve shorted, and you’ve borrowed the stock from the people behind the plan, they can demand it back: at which point you’ve got to go and purchase stock in the market to be legal in your short. But, if those people running the scheme own all the stock that it is possible to either purchase or borrow then you’ve, well, you’ve got to deal with them, haven’t you? This means that the people running such a scheme are taking money out of the hides of the shorts rather than suckers on the general market.
From here
On June 16 the company’s shares were priced at a mere 6 cents, since then the price has gone through the roof and are now trading at more than $15, giving it a market capitalization of around $4.1 billion. Trading in Cynk Technology was stopped on Friday after its shares soared 25,000% in 16 trading days.
The suspicion is that this is a ‘pump and dump’ operation, something that’s illegal. The idea is to take a very thinly traded stock and drive the price up by purchasing some of it. People will note the price rising and some of them will (or might) purchase some, pushing that price up further. At which point sell out of that original stake and bank the profits. This is market manipulation and is frowned upon. But it is also very common.
An alternative thesis was hat this wasn’t a pump and dump at all, rather, it was only to give the appearance of a pump and dump. To explain: someone makes it look like Cynk Technologies is going through an obvious pump and dump scheme. The obvious way to do this is to actually run one: buy some stock, noisily and over time in a number of transactions and watch that price rise. So now the price has risen and the short sellers start to take a look. Obviously there’s good money to be made in shorting a pump and dump so they do. However, in order to short a stock you’ve got to go and borrow the stock you’re shorting. And those who have lent you that stock can demand it back as an when they wish. So if you’ve shorted, and you’ve borrowed the stock from the people behind the plan, they can demand it back: at which point you’ve got to go and purchase stock in the market to be legal in your short. But, if those people running the scheme own all the stock that it is possible to either purchase or borrow then you’ve, well, you’ve got to deal with them, haven’t you? This means that the people running such a scheme are taking money out of the hides of the shorts rather than suckers on the general market.
From here
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