After the price has risen, the holders “dump” the stocks at inflated prices onto those buying in after hearing the news. During a pump and dump, marketers who hold shares of a particular security intentionally spread false or misleading information about the company issuing the stock, which causes the price of the stock to rise sharply. One of the most popular forms of penny stock fraud is the “pump and dump” scheme. Penny stocks have historically been subject to scams and artificial price inflation due to their ease of manipulation. A penny stock might be sold on an over-the-counter (OTC) exchange but many are also sold on SEC-regulated exchanges like the New York Stock Exchange (NYSE). Despite the name, the term “penny share” can be applied to any stocks under $5. ![]() Penny stocks are shares of small companies that typically trade for significantly less money than shares of larger companies.
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