CYNK Latest Wall Street Trap?
Cynk is a social network company that has no revenue, no assets, and no profits. Until last week, it was the hottest stock on Wall Street, according to a Business Insider report by Hunter Walker and Julia La Roche (July 14, 2014). Its stock rose to $21 per share on July 10th, which gave the company a value of over $5 billion. In June, the stock had been trading around ten cents per share.
Citing concerns about Cynk’s inexplicable rise and the accuracy of its information, the Securities and Exchange Commission (SEC) has shut down trading in the stock until July 24th. This measure will likely end what was a 25,000% increase in share price, as more and more bizarre details about the company emerge.
Cynk operates the social network IntroBiz, which promises to sell celebrity contact information to its users. Whatever potential the idea has, the site has not delivered on it. Introbiz contains little in the way of content, as its front page lists 24 celebrities to whom it will introduce users for a fee of $50.
If its product seems underdeveloped, the structure of the company is even more questionable. Cynk has only one employee, its CEO Javier Romero. The company is based in Belize, where Romero used to work as a fisheries official for the government, but it was founded in 2008 by John Kueber in Nevada. Kueber serves as a director for ten other companies incorporated in Nevada.
These factors strongly suggest a pump and dump scheme, a type of scam that featured prominently in the recent movie “The Wolf of Wall Street.” In a pump and dump scheme, crooked traders artificially inflate the price by hyping up the stock and getting out before the public figures out what’s going on. Penny stocks such as Cynk, that have a share price below $5 and are not listed on national exchanges, make good targets for scammers because their prices often move unpredictably.
While no one could have predicted such a staggering overvaluation, irregularities and penny stocks often go hand-in-hand. Companies like Cynk remind investors that prudence offers the best return in the market.
Page Perry is an Atlanta-based law firm dedicated to protecting investors.