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Saturday 15 June 2013

HAIR / Biostem Pump and Dump rakes in the dollars

If like me you've been plagued with pump and dump spam messages for Biostem US Corp (stock ticker HAIR) for the past several days, you might be curious to know if this massive spam run is actually having any impact on the company's share price.

The stock spam started after the close of trading on Friday 7th June 2013 and has continued aggressively ever since. In parallel, the message boards for HAIR were spammed with some fairly obvious attempts to pump up the price, the following screenshot is from the Yahoo! message board.

If we look at a stock chart for Biostem, we can see that something raised the stock price from the $0.21 it had been stuck on for a while (after collapsing from about $1 a share in February) up to $0.36 on the close of business on 10th June, an increase of 71%, before settling at around $0.29 (a 38% increase).

As pointed out here, Biostem is a pretty awful looking stock where the CEO was recently arrested, accounts are overdue and the last reported financial position of the company was dire, so it looks like it is on its last legs. But crucially there seems to be no news of substance about the company, so we can assume that all the stock price movement is purely down to the pump and dump spam.

The usual volume of trade for Biotech (HAIR) stocks is pretty close to zero. From when the markets opened on Monday 10th June to the close of the market on Friday 14th June, over 2.2 million shares were traded when normally we would expect to see a few thousand if that.

There had been bursts of trading activity recently, but the most interesting was a period from 9th May for about 6 trading days when over 1.3 million shares were bought for no particular reason. After that was a period from 20th May when a further 270k shares were purchased, perhaps as speculators sniffed around the company.

We don't know who is behind the pump and dump spam run, but we assume that the spammers are the ones who bought the 1.3 million shares or so after the 9th May. If they manage to dump those shares at the peak they could have made over $200,000. But the spam run didn't stop there, and as of 15th June it is still going on. Why? Presumably because somebody still has shares in the company that they are still trying to offload. In total there are 114.2 million shares, and only 2.2 million (1.9%) of them were traded during that week.

The sad fact of the matter seems to be that pump and dump does seem to have a positive effect on this sort of thinly-traded low-value share price. But the thing is that the spammers have already taken out their positions in the target company, it is almost impossible for a normal investor to make any money out of this because as soon as the spamming starts, then the stock dumping starts as well.

1 comment:

Julek said...

I also got this spam. Funny thing is that yesterday the price fell from .19 to .10 : http://www.bloomberg.com/quote/HAIR:US . And: "Biostem U.S. Corporation Suspends Operations" :)
I guess the spammers didn't earn a lot of money this time