SEC proves spam works really well

SEC proves spam works really well

Summary: If you want to know whether something really works follow the money. The Securities and Exchange Commission has just proved spam works really well.

TOPICS: Tech Industry

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.

Topic: Tech Industry

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  • Can't always protect morons from themselves.

    Anyone that would buy a stock based on a spam "pump-n-dump" email is, well... a moron. That would seem to me to be right up there with the Nigerian bank scam. Pretty much nothing on the web can be trusted completely and unsolicited garbage is absolutely a 100% scam. I'm amazed that people haven't figured that out yet.

    Until we can figure out how to stop spam at the SMTP level, this type of thing will always be a problem. If you can't keep the spam away from the millions of gullibles out there, you aren't going to contain the problem.
    • "on the web"?

      Pretty much everything on [b]what[/b] exactly can be trusted completely? :))
  • And just how much money did the SEC spend tracking these tiny amounts?

    So the SEC wastes tax dollars and time chasing penny stocks when the people stealing real money or doing lunch. What about CEO's of large corporations such as Lucent that hyped the value of their stock making claims like 'the company is in a rare position for forecasting their sales 18 months into the future' (are you paying attention Rich?) and then doing a 180 by not making their numbers? What happened to that CEO, was he fired was he sent to the big house, does he live in the poor house? No, he was given a gold parachute for misleading investors which is worth a magnitude more money than these penny stock people are accused of taking. Why doesn?t the SEC go after the big dollar CEO? No doubt because they make the campaign contributions to the politicians.

    The amount of money that was involved in one of the stated cases in the article was something like 15 cents/share with a volume of 5 million shares. That is about 600k which is more money that I have to throw around but pocket change compared to what the CEO?s are getting for their hand waving. Who is the real criminal here? The only thing that irritates be about the penny stock scams are that I get too many messages from them, not that they tried to get me to purchase their stock.
    • What happened?

      Did your biggest client get snagged?

      Part of the job of the SEC is to go after securities fraud, which includes the sort of pump-and-dump schemes promoted by stock spammers. I sent all of my stock spam to the SEC for years, hoping they'd do something like this. Looks like it just might be worth my while to resume.
      John L. Ries
      • I get tons of these message

        To almost every account I have and it's really picked up in the last month or two. I guess the hit rate is decent enough to continue for them. With a penny stock all they need is a few people to juice the shares.
        Larry Dignan
      • No, I lost a lot of money

        Somehow I expected a shallow answer such as yours on this board and it did not take too long, did it?

        I lost thousands of dollars because Lucent management made misleading statements regarding the financial outlook of the company. The CEO got off free, his lap dog went on to be the CEO of HP and she also walked free and the SEC is chasing pennys because the penny stocks are not wealthy enough to make campain donations.
    • I don't know about Lucent's CEO,

      I don't know about Lucent's CEO, but their Group President for Global Services went on to become HP's CEO ;)

      And yes, from what I remember, Lucent's projections from their services organization was one of the major factors in the hype...
  • Spam research

    You may find the research from Frieder and Zittrain interesting (serious academic types). Spam works: Evidence from Stock Touts and Corresponding Market Activity.
    I blogged about it here.