If you want to know whether something really works follow the money. The Securities and Exchange Commission has just proved spam works really well. Shockingly well.
The SEC said in a statement yesterday that it suspended the trading in 35 companies in "Operation Spamalot." These stocks traded as "pink sheets," which are basically illiquid. Think roach motel for investors.
But if you toss in some spam with a catchy subject like "Fast Money" and things get liquid pretty quickly. The SEC said 100 million stock spam message are sent each week. And it works.
Consider from the SEC release:
- On Friday, Dec. 15, 2006, shares in Apparel Manufacturing Associates, Inc. (APPM) closed at $.06, with a trading volume of 3,500 shares. After a weekend spam campaign distributed emails proclaiming, "Huge news expected out on APPM, get in before the wire, We're taking it all the way to $1.00," trading volume on Monday, Dec. 18, 2006, hit 484,568 shares with the price spiking to over 19 cents a share. Two days later the price climbed to $.45. By Dec. 27, 2006, the price was back down to $.10 on trading volume of 65,350 shares.
- On Dec. 19, 2006, trading in Goldmark Industries, Inc. (GDKI), closed at $.17 on trading volume of 126,286 shares. On Dec. 20, 2006, the spam campaign started, with e-mail proclaiming "GDKI IS MAKING EVERYONE BANK!," and setting a 5-day price target of $2. By Dec. 28, 2006, spam emails boasted of the price spike that had already been achieved -- "$.28 (Up 152% in 2 days!!!)" -- and promised a 5-day price target of $1. That same day, GDKI closed at $.35 on a volume of more than 5 million shares. By January 9, 2007, the closing share price was back down to $.15.
- A spam campaign in Healtheuniverse, Inc. (HLUN) stock began on Sept. 4, 2006, with emails incorporating a Healtheuniverse press release proclaiming that HLUN was "focused on being the first to commercialize stem cell applications in the $15 billion worldwide plastic surgery and cosmetic surgery market." On Sept. 7, 2006, HLUN closed at $.12 per share on trading volume of 3,000 shares. The spam campaign accelerated, and HLUN shares spiked to $.22 per share on Sept. 11, 2006, with over 2.2 million shares trading hands. By Sept. 22, 2006, the closing price had dropped back down to $.11.
The lesson learned. Spam works really well. In this case too well.