Bloomberg
How a penny stock explodes from darkness to 451% profits via chat forums
(Bloomberg) – “Are you still awake?” It was 19:43 on January 19 and TRGainz, a regular user of the social media platform Stocktwits, was getting angry. So too was Alwaysliquid. “Can’t sleep,” he shot back seconds later. In about nine hours, the financial markets in New York would open, and when that happened, a dark penny stock named Blue Sphere Corp would suddenly and seemingly miraculously emerge. rises, giving a windfall of about $ 30 million to those who uploaded the stock in the weeks before. TRGainz and Alwaysliquid knew what was coming and struggled to contain their excitement. During those days, the chat on this Stocktwits page and others, such as a message board for Reddit users dedicated to penny stocks, gradually worked on the development of Blue Sphere. The company does not appear to have had a stock exchange listing or recent financial disclosures of any kind. matters to anyone. It was a clean energy company, and with the Democrats’ control over both the White House and Congress, that was enough to make it a salable story for the day masses that turned into an unstoppable force in the big pandemic stocks. .Moneyman223 was a prominent voice throughout and asked fellow members to jump in before the stock exploded. “Come in or regret not coming in,” the moneyman posted early Jan. 14, a day after another Stocktwits member branded Blue Sphere a clear winner from the Democrats’ climate change agenda. The next day, the last session of Moneyman223 traded again before the long weekend: “not too late for you fools to come in yet.” Then a character named byelowsellhi declared, “Have a wonderful weekend with future millionaires.” Blue Sphere shot into the heights as advertised on January 19th. By the end of the day, it was 451% higher, rising from six tenths of a cent to more than 3 cents. About 2 billion shares traded that day, staggering and yet not entirely abnormal, in an emerging new era of speculation about pennies. The chat forum messages came quickly and furiously as the stock soared: “Amazing day everyone,” “we will be nasty rich together” and “congratulations to everyone who took the risk and believed in yourself! !!!!! ” On a given day, there are a dozen or more Blue Sphere-like tales of small, lucrative companies mysteriously going from obscurity to viral sensation. The ferocious pace of boom in these penny stocks drowned all other forms of speculative mania during the pandemic era. Name it another froth – retailers with mass psychosis amid commission fees and no interest rates – to be filed with the GameStop Corp. saga, the triple-entry rally in cryptocurrencies, the SPACs being minted daily and the record highs hit by major stock indices. “People are starting to look around and say, ‘What else can I do with my money?'” Said JJ Kinahan, chief market strategist at TD Ameritrade. Rules regarding over-the-counter securities trading vary from broker to broker, but can be purchased at any price on TD Ameritrade’s trading platforms. “It’s one of those at the top of my list to tell people, ‘Please understand the risk of getting in there. “I learned early in my life. If there are many upside down, there are many disadvantages. People may just not want to know what the downside is. ‘For someone who observes from a distance, it is difficult to understand how the current stocks are selected. How do critical masses form around them? The universe of foreign exchange companies in America is large, and they deal with lightly regulated quotation services where information is scarce or non-existent. Like everything on the internet, it is almost impossible to trace the exact origin. But if one tries to detect the spark, the fact is that these types of conversation board messages almost always rise, and although no one so far attributes the illegal setup in today’s merchants’ chat rooms, it’s hard not to agree with the penny stock. crazes of yesteryear, when schemes like ‘pump-and-dump’ and ‘bigger fool’ were the rage. Stocktwits, which considers itself the largest community for investors and traders, has increased its focus on content moderation and support. according to CEO Rishi Khanna, to give the chance to get rich-quick-quick-get-rich-quick is something we are watching for. Now we can not clearly pay attention to every screen, so we depend on the community to report something that might look a little off or funky, ‘Khanna said in an interview. “We’re not going to stop everything – it’s just physically impossible, but we’m doing our best.” Attempts to contact Blue Sphere officials for comment were unsuccessful. Emails and voicemails left by Bloomberg News were not answered. The company has not filed a report with the U.S. Securities and Exchange Commission in about two years. In the wake of the stock boom last week, a Stocktwits member with the username WolfeRegalia wrote: ‘I can not find any real information. The company’s website has money back to 2018. Can you recommend any clues? Thank you in advance. ‘It’s the challenge of telling a true long-term penny stock investment from a straight pump – when a group of people are stacking in the same stock at the same time to quickly influence prices. to penny stock trading recently updated its rules to limit the user’s shilling. The site, r / pennystocks, now has more than 430,000 members – “astronauts”, who use the site’s own name. According to Breakout Point, a data and analytics industry that tracks such information, it is 21% higher than the end of December. At the top of the r / pennystocks page is a multiple menu. One option reads ‘Identify a pump’ and switch back to a three-year message titled: ‘How to find and drive pumps.’ The first step? Start according to the report by downloading Stocktwits, but use your own discretion. “I hesitate to tell you this simply because I do not want you to buy all the hype there,” the report said. ‘Remember, do not trust anyone, especially not all the conversations about Stocktwits. Most of it is all rubbish. Do not believe it. ‘Then look for a stock that has recently been parabolic, do research to see what people people said before the boom (these are the pumps), track the people and set up alerts for when they make new posts. “Do not cross the border,” reads the report. ‘Now I want to emphasize here that it is illegal to pump a stock. However, investing in a stock that rises in price and volume is not. ‘But in conclusion: “Good luck everyone! May your losses be low, and your gains high. “There are a lot of hopefuls these days.” The custom day traders who were such dominant forces in the market – they are still finding other places to go and bringing speculative fervor into the mix, and penny stocks seem to be the latest, ”said Liz Ann Sonders, Charles Schwab’s chief investment strategist, said. Trading in OTC stocks is available for those with Schwab brokerage accounts. “I have no speculation or knowledge or even guess at what it starts with, but whatever happens, it feeds on itself and years to date it has been a hot trend.” As for Blue Sphere, it seems the fever has not broken. The share price collapsed nearly 50% in the first three days after the January 19 return, but on Monday it shot higher again and ended the day with 2.2 cents, with a gain of 26%. Feel free to visit us at bloomberg.com. Sign up now to stay ahead of the most trusted business resource. © 2021 Bloomberg LP