pump and dump29 Aug 2013 22:30
Pump and dump schemes may take place on the Internet using chat rooms and bulitin boards, Often the shares promoter will claim to have "inside" information about impending news. Newsletters may purport to offer unbiased recommendations, then tout a company as a "hot" shares, for their own benefit. Promoters post messages in these chat rooms or message boards urging readers to buy the shares quickly.
If a promoter's campaign to "pump" a share is successful, it will entice unwitting investors to purchase shares of the target company. The increased demand, price, and trading volume of the shares may convince more people to believe the hype, and to buy shares as well. When the promoters behind the scheme sell (dump) their shares and stop promoting the stock, the price plummets, and other investors are left holding stock that is worth significantly less than what they paid for it.
Frequently they use this ploy with small, thinly traded companies—known as "penny shares,"because it is easier to manipulate a share when there is little or no independent information available about the company this principle applies in the United Kingdom, where target companies are typically small companies on the AIM or OFEX.