Penny Stock Promotions Explained

Stock promoters in the penny stock industry have had a bad reputation since the beginning of the OTC Market.

What many investors do not realize is their vital role in the trading of penny stocks. Without paid promotions, penny stocks would have an extremely hard time being noticed from potential investors. Whether a company is big or small everyone needs help marketing themselves. There are two types of penny stock promotions, good, and bad.

Why do companies need market awareness?

For revenue of course! Typically a promotion starts when a company is belly-up and/or is in serious need of capital. If the particular company is credible they will use the funds they have raised primarily to support sales, marketing, product development, and everyday working capital. Without market awareness they would not be able to get the funding they need for growth and expansion.

If the company is “un-credible” they will use the money how ever they please, let their company rot away, and leave bag holders behind. This is where the importance of your own due diligence is crucial before investing in ANY penny stock!

There are many different promoters in the penny arena and not all of them are credible. Some penny stock promoters “front load” shares (i.e. buy shares before a promotion starts) in order to dump them on unsuspecting investors. These types of promotions are the “bad promotions”.

Did you know that some people are paid to “pump” and “bash” penny stocks?

Pumpers: The role of the pumper is to create excitement and awareness for a company. Their job is to post forward looking statements on various messages board, social networking sites, etc. Pumpers are paid by third parties to help stir up a crowd when a promotion campaign starts. Pumpers are required by law to have a visible disclosure stating how much they have been paid to promote a company and by whom.

Bashers: The role of the basher is to clean up the mess after the promotion has ended. Typically you will see them come in during a promotion and continue bashing a company until the heat dies down. Bashers are used for the sole purpose of adding a little “distaste” during a major promotion. Although adding negativity to campaign may sound like a bad idea, it only adds fuel to the fire. A pumper and a basher will argue facts about a company, and in doing so, the curiosity of investors goes haywire. Currently, there are no disclosure requirements for bashers.

Corporations are required to have their own investor relations department.

Before you consider investing in any micro-cap company give them a call. Their job is to communicate with investors and answer any questions you may have.


***Reminder: never chase stocks that gap at the open and always protect your profits!

Good luck in making the Best Penny Stock picks.

2012 – Become a Millionaire!!


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