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Sometimes even a 24,000% gain can be a bad thing, especially if it involves a very dicey penny stock.
CYNK Technology Corp.'s (OTC: CYNK) spike from $0.10 in mid-June to a Wednesday closing price of $14.71 represented a gain of 24,417% in less than four weeks.
That might look like one of the greatest investing opportunities of the century, but CYNK is the kind of penny stock that gives all penny stocks a bad name.
Not only was there no news behind that spectacular gain, but even calling CYNK a company is a stretch.
According to publicly available data, CYNK has never earned any revenue and had lost $1.5 million as of the end of 2013. Oh, and the company has no assets, either.
What it does have is an obscure website, site.introbiz.com, that purports to be a social networking "referral service for introductions." Here third parties can charge a fee for contact information on business professionals, celebrities, and more. Only two entities are listed on the site, Artist Black Book and World Talent Agency.
With the meteoric rise in the CYNK stock price, however, the market cap of this shadow of a company soared past $4 billion. That put CYNK's valuation above that of such companies as Regal Entertainment Group (NYSE: RGC), Advanced Micro Devices Inc. (NYSE: AMD), and U.S. Steel Corp. (NYSE: X).
Frankly, the whole situation is absurd, but penny stock investors can take some lessons away from the CYNK fiasco.
Just about everything regarding CYNK is a red flag, said Yahoo! Finance senior columnist Michael Santoli.
"Any ounce of investigation in terms of what this might have been as an underlying business would have shown you there's nothing to bother owning here," Santoli said in a video interview. "It just sort of shows you this game of hot potato that gets played in penny stocks."
And while penny stocks today get "pumped and dumped" all the time – hyped by actors seeking to make a quick buck, then dumped as soon as enough gullible investors buy to drive up the stock price – the CYNK situation stands out as unusual.
How could a penny stock like CYNK soar 24,000%, and who might be orchestrating it?