My old friend, the pump'n'dumper is still cranking out stock spam, but he has some new tactics. In a further attempt to avoid automated analysis, he has taken to dividing his embedded GIF images into several parts. More significantly, he has also switched from a pump-and-dump model to short-and-distort.
Pump-and-dump is easy to understand: it's just advertising. The spammer buys a block of stock and then sends out spam talking up the stock. If he's lucky, suckers buy in, the price rises and the spammer sells at a profit.
Short-and-distort is subtler. A short seller sells shares in a stock that he doesn't own, on the assumption that he can buy the shares he needs before the delivery date. If the share price rises in the meanwhile, he loses money. If it falls below the price that he sold at, he makes money. When an investor shorts a stock, he is essentially making a bet that its price will fall. A short-and-distorter tries to cover his bet by doing everything he can to insure that the stock does fall, typically by spreading negative information about the stock.
Talking smack about a stock isn't the only way to drive the price down. Roger Duronio, an ex-employee of UBS PaineWebber is currently on trial for allegedly planting a logic bomb in the firm's computers and then shorting the company's stock. Prosecutors claim that his goal was to profit from the fall in the company's share price that he expected would occur after his code took down their trading computers. But that's a special case.
Our spammer's approach is less complex. He's using spam to sow doubts about Xacord Inc. (NNGY.PK). Here's what he writes at the end of his message:
... We have received one million free trading shares from a third party, not an officer, directors [sic] or affiliate shareholder. We intend to sell all one million shares now, which could cause the stock to go down, resulting in losses for you. The company has: an accumulated deficit, a going concern opinion from its auditor, nominal cash, nominal assets and no revenues in its most recent quarter. These factors raise substantial doubt about its ability to continue as a going concern. A failure to finance could cause the company to go out of business. This report shall not be construed as any kind of investment advice or solicitation. URGENT WARNING: You can lose all your money by investing in this stock.
Whew. He really doesn't want you to buy stock in Xacord Inc. Although the disclaimer leads off with the standard boilerplate about:
Information within this report contains forward-looking statements etc etc ...
it quickly veers into a complete assault on the company's credibility.
Is what he says true? I have no idea. I know nothing about Xacord. The one thing that I do know is that if you really have a large number of shares that you intend to sell, you don't send mail to a million strangers saying "The company is doomed! I'm selling all my stock!" After you sell your million shares, you can say whatever you want about the company. Until then, unless you want the value of your holding wiped out, you only say nice things.
This is the first unequivocal short-and-distort scheme that I've seen, and it's done with all the subtlety of a sledgehammer. If I were the SEC (are you getting this, 'secfwopc.sec.gov'? I know you read this stuff ...), I'd be looking closely at anyone who's shorted NNGY.PK. Find one who has a lot of exposure and you've probably found your spammer.