Top Financial stock price: is this a pump and dump scheme?

TOP Financial (NASDAQ: TOP) stock price jumped by more than 22% on Tuesday as investors embraced a risk-on sentiment. The shares jumped to $10.37, which was higher than this month’s low of $6.30. This price is still 96% below the highest level this year, giving it a market cap of over $296 million.

What is Top Financial?

Top Financial, officially known as Zhong Yang Financial Group, is a mysterious Chinese company that provides online brokerage businesses. It provides futures, stock brokerage, options brokerage, consulting, and currency exchange solutions in China. Its primary products are 2Go and Esunny.

Top Financial is an extremely small company. Data compiled by SeekingAlpha shows that the company’s annual revenue dropped to $7.8 million while its net profit came in at $3.5 million. The company’s most recent results came in at $5.2 million for the six months to September 2022. This was a 63% increase while the net profit came in at $2.5 million.

Top Financial stock price surged this year and peaked at $256. At its peak, the shares jumped by more than 3,532% from the lowest level in April. This rally was mysterious since it happened with no major news, pushing the SEC to temporarily suspend it. In its statement, the company said:

“The Commission temporarily suspended trading in the securities of TOP because of recent, unusual, and unexplained market activity raising concerns regarding the adequacy and accuracy of publicly-available information.”

The recent performance brings back memories of AMTD, the Hong Kong company whose shares surged in 2022. Since then, the shares have plunged by more than 95%, as I wrote here.

A pump and dump scheme

A likely reason for the recent surge of TOP stock price is that this is just another pump-and-dump scheme. These schemes work when people spot an illiquid company, buy shares and then promote their acquisitions. As the stock jumps, they exit, leaving many wannabe investors holding the bag.

We have seen several pump and dump schemes recently. The best example of this is Bed Bath and Beyond, which filed for bankruptcy recently. Its stock surged during the meme investing frenzy and then came crashing down. The same is true with other meme stocks that have plunged recently.

The other good example is companies that went public through SPACs. Many of them have plunged while others like Virgin Galactic have gone bankrupt. In a report on Tuesday, the WSJ said that insiders in these companies sold shares worth billions of dollars before the crash.

Therefore, in light of all this, it does not make sense investing in Top financial stock. It is a foreign company with limited disclosures and questionable operations.