The Ulterior Motives of Some Online Stock Message Board Members - dummies

The Ulterior Motives of Some Online Stock Message Board Members

By Matt Krantz

Although many of the people who use online stock message boards might be upstanding individuals just looking to help their fellow man, great caution is warranted. People can abuse online stock message boards for personal gain in several ways, including the following:

  • Hyping stocks they own: Some members might exaggerate or even make up good news regarding a stock they own, hoping to fool others into buying the stock. This is commonly called a pump-and-dump scheme or ramping. Scammers first “pump” a stock by doing whatever it takes to artificially inflate a stock price, usually by spreading lies. Then they “dump,” or sell the stock before anyone catches on.

  • Disparaging stocks they’re shorting: Investors can profit from a falling stock by shorting shares. Some investors might spread false rumors about a company with the hopes that such rumors will cause a panic and get others to sell.

  • Promoting companies that pay them: Questionable companies can hire legions of stock promoters to stoke enthusiasm for their shares. These promoters might float a stream of positive press releases online, trying to create the appearance that the company has lots going on.