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Glossary

Word of the Day

Pump and Dump

“Pump-and-dump” schemes involve the touting of a company’s stock (typically small, so-called “microcap” companies) through false and misleading statements to the marketplace. These false claims could be made on social media such as Facebook and Twitter, as well as on bulletin boards and chat rooms. Pump-and-dump schemes often occur on the Internet where it is common to see messages posted that urge readers to buy a stock quickly or to sell before the price goes down, or a telemarketer will call using the same sort of pitch. Often the promoters will claim to have “inside” information about an impending development or to use an “infallible” combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is “pumped” up by the buying frenzy they create. Once these fraudsters “dump” their shares and stop hyping the stock, the price typically falls, and investors lose their money.

Additional Information

Investor Alert—Don’t Trade on Pump-And-Dump Stock Emails
Investor Alert: Social Media and Investing – Avoiding Fraud
Pump and Dump Schemes
Microcap Stock: A Guide for Investors
Microcap Fraud spotlight
Internet Fraud

 

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Red Flags

Understanding these terms may help you steer clear of investment scams.

Ponzi scheme, pyramid scheme, pump and dump

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