Twitter: A Pump-and-Dump in the Making
"Pump-and-Dump" schemes traditionally refer to the manipulation of penny stocks for the benefit of a few people. In its entirety, "Pump-and-Dump" schemes involve a group of people buying large quantities ("Pump") of a stock and then falsely promoting it so that the stock grows at an exponential rate. When the stock has reached levels that the group likes, they will sell, or "Dump", all of their shares and stop promoting the stock. This results in the catastrophic fall of a stock, most of the time falling to levels below which the fraudsters bought the stock at. One stock that has fallen victim to this scheme is XLI Technologies.
When it comes to the big companies, though, accusations of these scams are usually dismissed. However, I see Twitter to be apart of a large, complex "Pump-and-Dump" scheme. Here's why:
-For the past month, Twitter has been in the news as a possible buyout target. Among the buyers included Disney, Salesforce, Google (Alphabet), and most recently SoftBank. When rumors flew about numerous "sources" stating Google or Salesforce were potential buyers of Twitter, the stock surged 21%. However, when these rumors slowly faded away, and when these "sources" stopped reporting on Twitter, the stock collapsed by more than 25% in the following 3 weeks (September 28-October 14). During this period, all the major financial news outlets barely (if at all) emphasized Twitter's downfall. It is known that those who engage in "Pump-and-Dump" schemes stop promoting the stock after it falls, but then start again when the stock rises. Just like how CNBC and others stopped emphasizing Twitter during its fall, they started hyping the stock again when it went up by more than 7% on Friday amid a potential SoftBank-Twitter merger.
-Expanding on that potential SoftBank deal, there is absolutely no conclusive evidence SoftBank even wants Twitter. When the first notable story of the potential acquisition surfaced, it was stated that the information came from European-broadcasting company Flyonthewall. Instead of posting the information based off of reliable, trustworthy sources, Flyonthewall posted the rumored merger based off of what every-day traders/investors were saying. Put simply, Twitter's stock rose more than 7% on Friday based off of what a trader/investor no better than you said.