Spam Stock Pumpers blitz new year market

The new year has started in style for the spam artists that pump small cap stocks, usually to be found on the USA's bulletin boards.

Many of the "newsletters" that fill inboxes claim to be legitimate mailings sent by companies or their shareholders. The companies are not happy.

One spammer habitually puts "We have received monetary payment for this mailing service We hold no stocks and have no personal interest in this company" in the mail they spew out of anonymous servers with reply addresses that will not work.

Another says it ", publishes reports providing information on selected companies that [it] believes has investment potential. [it] is not a registered investment advisor or broker-dealer. This report is provided as an information service only, and the statements and opinions in this report should not be construed as an offer or solicitation to buy or sell any security. ... An affiliate of [the spam artist] has been compensated nine hundred thousand free trading shares of common stock of [the company written about by a third party for the publication and circulation of this report. [it] intends to sell all or a portion of the of the stock at or about the time of publication of this report. Subsequently [it] may buy or sell shares of stock in the open market. This report contains forward-looking statements, which involve risks, and uncertainties that may cause actual results to differ materially from those set forth in the forward-looking statements. For further details concerning these risks and uncertainties, see the SEC filings of [the company] including the company's most recent annual and quarterly reports."

The spams are generally express of thinly veiled exhortations to buy a stock - but sometimes the approach is more subtle: instead of passing any comment, a press release, which may or may not be legitimate, is sent to hundreds of thousands, perhaps hundreds of millions of mailboxes entirely indiscriminately. This contains no "publisher" comments as to the viability of the stock. One such company says "****** Advertising Disclaimer ****** We are an Internet Advertising Company and have received a monetary payment for this mailing service. We hold no stocks and have no personal interest in this company whatsoever. We are simply being paid to perform a service."

Perhaps. Put the evidence that this is not a legitimate practice is the fact that the return address is at a webmail box which will instantly fill up with bounced messages and which is absolutely useless as an "unsubscribe" address, despite being given as such. One such mail, purporting to come from decidedly English name appears (one can never be certain) to have originated in Uganda, bounced from Nigeria and Nuie but the unsubscribe address is with US webmail provider Excite (and one can't blame them, particularly, unless the granting of unauthenticated e-mail accounts is to be criticised.)

The Nuie connection may be right: a series of spams, all for different companies and claiming to come from different publishers, have all been sent to the same group of people - the sender is careless with his mailing programme so that at least a part of the mailing list is published and the same names in the same order appear as recipients in several mails. All use the Nuie connection.

There is a common factor in most of these spams: the publisher has, it claims, identified a company that is hugely undervalued. It is, the spam claims, due for a massive rise in percentage terms. Sometimes, the stocks are trading at only a couple of cents each. So a tiny monetary movement is a big percentage change.

If the publisher or its pals have been paid tens of thousands, or even millions, of shares, as they claim, then the value of those shares, if they can sell them, shoots up.

Whether the spams contain viable information or not one must ask several questions about the honesty of the publishers - first, why do they hide their identity; secondly, why do they spam using several different identities; third, why do they lie in their spam saying that the recipient has subscribed when the addresses have been harvested from websites.

The people that fall for these scams are not as naive as those that fall for Nigerian scams - here there is real money to be made if purchasers get in fast and can get out. The problem is getting out. The only people that are likely to want these stocks are people that are piling in behind the wave, probably having read the spam a few days after the first wave of advertising and seeing the results.

The schemes are basically pyramid schemes: it's the last batch in that lose everything.

In this game of financial chicken, there are always some who will win. But not many. Stock pumping e-mails are a pest but because regulators are unable to act fast enough to prevent market abuse in this international and largely anonymous market, the problems will continue to develop.

But there is one group of people who may be able to help: those who negotiate the trades. If the price is lifting due to illegal market manipulation, then the money may be proceeds of crime. And dealing in it may be laundering.

Another issue to watch for.