CYNK Technologies, a company that for years traded for pennies on the stock exchange has suddenly exploded 25,000 percent and is now trading at $41 a share with a valuation of over $6 billion. Before you rush out to sink your lifesavings into CYNK, it’s very important to understand that CYNK is actually nothing. It’s a shell company operating a platform with no business model. It’s a social networking site with no followers, no friends, and no assets. In fact, CYNK has zero content and only one employee, yet is very suddenly worth more than any NFL football team, and more than half of them combined.
CYNK operates a social networking site called Introbuzz, which, in theory since this doesn’t even exist, works like Facebook but friends pay fees to follow friends in a networking capacity. Almost like LinkedIn, but again, it doesn’t even function. Here is an excerpt taken from the CYNK business plan, as reported byThe Wall Street Journal:
“Introbuzz plans to be a social network that is also based of showing the types of people you are connected with and are associated. However, it’s also based on the idea that people should, and will pay to get in touch with people you know. Furthermore, money or donations act as a convenient reason to get in touch with people who can benefit your career or enhance one’s life.”
The article goes on the explain that Introbuzz was originally supposed to launch in the second quarter of 2012, but as of today only has a domain name registered for www.introbiz.com and no other filings.
Why would a company like CYNK, with no product and a laughable business model, suddenly trade at such high volumes? The actual name for this is “pump and dump” and the Securities and Exchange Commission (SEC) monitors this illegal activity everyday. Here is the definition, taken directly from the SEC website:
“‘Pump-and-dump’ schemes involve the touting of a company’s stock (typically small, so-called ‘microcap’ companies) through false and misleading statements to the marketplace. These false claims could be made on social media such as Facebook and Twitter, as well as on bulletin boards and chat rooms. Pump-and-dump schemes often occur on the Internet where it is common to see messages posted that urge readers to buy a stock quickly or to sell before the price goes down, or a telemarketer will call using the same sort of pitch. Often the promoters will claim to have ‘inside’ information about an impending development or to use an ‘infallible’ combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is ‘pumped’ up by the buying frenzy they create. Once these fraudsters ‘dump’ their shares and stop hyping the stock, the price typically falls, and investors lose their money.”
In April, Michael Lewis, an ex-hedge fund manager went on 60 Minutes declaring the stock market is rigged. Shell stocks, like CYNK and “pump and dump” schemes, call into question the ethics of what exactly transpires on Wall Street. Even Businessweek has called out CYNK and the run up of value, saying that it’s the result of a “bored summer Wall Street.” So, essentially, traders and investors are bored, and are taking the unpopular kid in class and propping her up as something she’s not. This is the plot of Stephen King’s Carrie. We’ve all seen how this ends (Spoiler Alert: badly).
CYNK shares continue to trade and its value goes higher and higher, and not even the SEC has stepped in to investigate. Is this really how we want our savings and our 401(k)’s handled when the people we trust get “bored” over the summer? Is this a portent of another bust, like in 2000 and 2008? Whatever happens, CYNK is the poster child for improprieties on The Street, and hopefully it will be stopped and taken down before someone “sinks” their savings and loses it all.
[Image Courtesy of The Hollywood Reporter]