Performance of spam stocks – a very non-scientific survey
posted by Kaimipono D. Wenger
I get a fair number of spam e-mails advertising stocks. They’re often penny stocks, and the e-mails often project outrageously high returns (”5 day expected return: 325%”). On a whim, I saved the e-mails that I’ve gotten for the past 10 days, to see how well the spam stocks performed. This is what I found:
April 20: MDBF.PK, then $1.25, “profits of 300% to 500% expected.”
Result: I can’t locate a Yahoo chart going back to April 20. (I don’t think Yahoo keeps charts that long for some pink sheet stocks). (Note: Most of these Pink Sheet stocks – not particularly surprising.) I did locate current price and a 5-day chart. It’s currently trading at .60 . It’s been up to $1.20 in the past 5 days. There’s no indication that it ever came close to the $5 suggested in the spam e-mail.
April 21: SIKY.PK, then trading at 0.26, spam e-mail suggesting “great” returns.
Result: It’s now trading at 0.26; 5 day charts show that it did make it to the 60-to-80 cent range a few days ago.
April 24: KKPT.PK. Then trading at .86, spam e-mail suggested target price at $3.25 in 5 days.
Result: Yahoo has longer charts for this stock, so we can see: The price rose on the day of the spam, going to $1.12. Volume went from 87,000 to over a million, a thirteenfold increase. It peaked a day later at $1.13, and is now back to 90 cents.
April 24: CWTD.OB. Then trading at $1.39; spam e-mail suggested 200-400% profits in the next few days.
Result: This one is actually doing quite well. The spam drove the price from $1.39 to $2.10 in a single day, as volume rose from 62,000 to over 3 million. It peaked a day later, and is now standing at $2.00.
April 26: IKMA.PK. Then trading at 30 cents a share; no target announced, but spam suggested that doubling of value would not be unusual.
Result: Volume went up, from 200,000 to 400,000. Price dropped like a rock. Currently trades at 13 cents.
April 27: PGCN.OB. Then trading at 45 cents; 5 day target of $2.
Result: Appears to be another spam-created spike. Volume shot up, and the stock briefly went over a dollar, shortly after the spam; it’s currently in free fall.
Results: This very non-scientific survey — based only on what’s come into my inbox in the past few days — suggests a few possible take-home points, none of them particularly earth shattering.
First, spam works. Pump and dump works. Someone almost certainly made a lot of money on these stocks by buying them ahead of the spam, and then pumping them with the spam, and then presumably selling when the stock peaked.
Second, spam e-mails do a very good job of generating volume. I knew going in that these sorts of schemes work by generating volume in a usually thinly traded penny stock; still, it was sobering to see volume go from 60 thousand to 3 million in a day – and to note the perfect correlation with the date of the spam e-mail.
Third point (related to the last) is that the old adage is true, there is indeed a sucker born every minute. Three million plus shares worth of suckers for one spam alone (and many, many more for other spams) — all hopping on to a badwagon being promoted by spam e-mails sent by automated programs and authored by “analysts” with names like “Cranach U. Flagellates.” Incredible.
Finally, this short glimpse of spam results drives home a point I already knew (and I really hope you knew as well) — these penny stocks seldom make anyone rich except those who run the scam. Some of these stocks did skyrocket briefly — but the lion’s share of the gain came very early, and so almost certainly went to people who knew about the scheme to begin with. No surprise there.
So nothing earth shattering; still, it’s fun to see old-school common sense points confirmed by a quick check of my own inbox. And yes, you have my permission to forward this post to your Uncle Charlie when he calls you excitedly tell you about the latest surefire stock, e-mailed to him by someone named Cranach U. Flaggellates.
May 1, 2006 at 3:58 pm
Posted in: Securities
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Responses (6)
Paul Gowder - May 1, 2006 at 6:22 pm
So here’s the question for stock wizards. Actually, two questions. (And WHY am I posting them on a public blog instead of privately asking someone and using the answers to make money? Dunno. Maybe I’m just contrarian like that.)
1. Is there any way to place market bets on volume? There’s so many weird stock instruments now, options and futures etc. etc., surely there’s a way to cash in on spikes in the VOLUME of trading. (Perhaps buying shares in broker commissions?)
2. Can one short-sell on the pink sheets? Say, about 1.5 days after the spams go out?
Bill Sjostrom - May 1, 2006 at 8:01 pm
Coincidentally, I blogged earlier today about a new SSRN paper on this very topic. See here.
Miriam Cherry - May 1, 2006 at 11:03 pm
I was just going to say that this looks like quite an interesting topic for a full-length paper. I’d like to take a look at the link you posted, Bill (hi Bill!) but it doesn’t seem to work. I wonder how much is lost in the typical pump-and-dump pink sheet scheme…
Just as a side note, I wish that I were lucky enough to receive spam email with stock tips. Most of the spam that I receive either offers me viagra, or various other, er, male “enhancements”. Now, there was that one time that I thought I won the lottery, but then I lost the proceeds when I provided bank account information to help an estate recover some money in Nigeria…
Vasu - May 2, 2006 at 8:29 am
This is bad. You should be using finance.google.com not Yahoo!.
According to the finance.yahoo.com programmer, they haven’t invested any serious time in developing that site for years. Google rocks however..
–Vasu.
asdf - May 2, 2006 at 3:50 pm
Sorry, overlooked the SSRN link already posted
asdf - May 2, 2006 at 3:52 pm
But I guess that doesn’t matter because my message didn’t show up. The ssrn paper was based on this:
http://www.crummy.com/2006/04/13/0
http://www.crummy.com/features/StockSpam/
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