Share pushing

Share pushing, also known as stock pushing or boiler room scams, refers to the unethical and often illegal practice of aggressively promoting shares to investors with false or misleading information to inflate the stock’s price.
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Updated on Jun 10, 2024
Reading time 5 minutes

3 key takeaways

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  • Share pushing involves the aggressive and misleading promotion of stocks to inflate their price for personal gain.
  • These schemes are often conducted by fraudulent brokers or “boiler rooms” that use high-pressure sales tactics.
  • Investors can suffer significant financial losses when the inflated stock prices collapse after the promoters sell their shares.

What is share pushing?

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Share pushing is a form of market manipulation where fraudsters aggressively promote certain stocks to unwitting investors using false, exaggerated, or misleading information. The goal is to inflate the stock’s price artificially so that the promoters can sell their shares at a profit before the price collapses.

This practice is commonly associated with “boiler room” operations, where salespeople use high-pressure tactics to convince investors to buy these stocks.

The stocks targeted in share pushing schemes are typically low-value, thinly traded, and often associated with small or obscure companies. Once the promoters have sold their shares at the inflated prices, the stock price usually plummets, leaving the investors with significant losses.

How share pushing works

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The share pushing process typically follows several steps:

  • Identifying target stocks: Fraudsters select low-value, thinly traded stocks that can be easily manipulated. These stocks often belong to small, obscure companies.
  • Creating hype: Promoters create false or misleading information about the target stocks, exaggerating the company’s prospects, upcoming deals, or technological breakthroughs. This information is disseminated through emails, newsletters, social media, and other channels.
  • High-pressure sales tactics: Boiler room operations employ aggressive and high-pressure sales tactics to convince investors to buy the promoted stocks. Salespeople may use cold calling, unsolicited emails, and other methods to reach potential investors.
  • Inflating the stock price: As investors buy into the hype, the stock price rises due to increased demand. The fraudsters capitalize on this by selling their own holdings at the inflated prices.
  • Collapse and losses: Once the fraudsters have sold their shares, they cease promoting the stock. Without the artificial demand, the stock price collapses, leaving the investors with significant financial losses.

This cycle highlights the deceptive nature of share pushing and its potential to cause substantial harm to investors.

Risks and consequences

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Share pushing poses several risks and consequences for investors:

  • Financial losses: Investors who buy into the hype can suffer substantial financial losses when the stock price collapses.
  • Legal consequences: Participating in or promoting share pushing schemes can result in legal action, including fines, penalties, and imprisonment for those involved.
  • Damage to market integrity: Share pushing undermines investor confidence and the integrity of financial markets, making it more difficult for legitimate companies to raise capital.

Understanding these risks is crucial for investors to protect themselves from falling victim to share pushing schemes.

Warning signs of share pushing

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Investors should be aware of the warning signs that may indicate a share pushing scheme:

  • Unsolicited offers: Receiving unsolicited offers or high-pressure sales pitches to buy stocks, especially from unknown sources, is a red flag.
  • Promises of high returns: Be wary of promotions that promise unusually high returns with little or no risk.
  • Lack of credible information: Difficulty finding reliable information about the company or stock being promoted is a warning sign.
  • Aggressive marketing: Aggressive marketing tactics, including frequent and persistent calls or emails, can indicate a share pushing scheme.
  • Too-good-to-be-true claims: Exaggerated claims about a company’s prospects, upcoming deals, or technological breakthroughs should be approached with skepticism.

By recognizing these warning signs, investors can better protect themselves from fraudulent schemes.

Protecting yourself from share pushing

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Investors can take several steps to protect themselves from share pushing scams:

  • Conduct thorough research: Verify the information provided by promoters and seek out independent, credible sources of information about the stock and company.
  • Consult with professionals: Seek advice from a licensed financial advisor or professional before making investment decisions.
  • Be skeptical of unsolicited offers: Be cautious of unsolicited offers and high-pressure sales tactics. Take time to research and consider investments carefully.
  • Report suspicious activity: Report any suspicious offers or activities to regulatory authorities, such as the Securities and Exchange Commission (SEC) or the Financial Conduct Authority (FCA).

Taking these precautions can help investors avoid falling victim to share pushing schemes.

Examples and case studies

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Share pushing schemes have been reported in various contexts:

  • Boiler room scams: In high-profile cases, fraudulent brokers operating from “boiler rooms” have targeted unsuspecting investors, leading to significant financial losses and legal actions.
  • Penny stock fraud: Share pushing is often associated with penny stocks, where the low trading volumes and prices make it easier to manipulate stock prices.
  • Online promotions: With the rise of social media and online communication, share pushing schemes have increasingly targeted investors through online platforms, using false information and aggressive marketing tactics.

These examples illustrate the diverse methods used in share pushing schemes and the importance of vigilance in protecting investments.

Share pushing is a deceptive and often illegal practice that can lead to significant financial losses for investors. By understanding the mechanisms, warning signs, and protective measures associated with share pushing, investors can better safeguard their investments and contribute to maintaining market integrity.


Sources & references

Arti

Arti

AI Financial Assistant

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Arti is a specialized AI Financial Assistant at Invezz, created to support the editorial team. He leverages both AI and the Invezz.com knowledge base, understands over 100,000 Invezz related data points, has read every piece of research, news and guidance we\'ve ever produced, and is trained to never make up new...