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The ugliest chapter in the strange story of CYNK Technology Corp. (OTCMKTS: CYNK) played out this morning (Friday) as the U.S. Securities and Exchange Commission's trading halt was lifted.
CYNK stock, which soared more than 24,000% in less than four weeks from mid-June to mid-July, cratered more than 80% at the open, falling from $13.90 to $2.50.
"There was probably a lot of money made and lost in this," Michael Block, chief strategist at New York-based Rhino Trading Partners LLC, told the Financial Post. "It's going to be a cautionary tale of people manipulating stocks and participating in run-ups."
OTC Markets, where CYNK stock previously traded, said it would no longer trade on its venues. Instead brokers need to trade the stock by phone in what's known as the "grey market."
Nevertheless, by noon Friday CYNK volume was over 272,000 shares – more than eight times the average.
The previously obscure penny stock drew scrutiny after its price rose from $0.10 in mid-June to as high as $21.95, which briefly put the company's market cap at $6 billion. Even at its previous close of $13.90, CYNK was worth more than such companies as Regal Entertainment Group (NYSE: RGC), Advanced Micro Devices Inc. (NYSE: AMD), and U.S. Steel Corp. (NYSE: X).
And yet the company, which purported to run a social networking website intended to be a "referral service for introductions," had never earned any revenue. In fact, CYNK had lost $1.5 million as of the end of 2013, and had but a single employee.
EDITOR'S NOTE: CYNK proves that investing in penny stocks can be dangerous, but if you know what you're doing it can also be very profitable. This is how to find the best penny stocks and avoid the losers…
Given its flimsy business, the extraordinary run-up in CYNK's stock price looked very fishy to the SEC, which halted trading on July 11 "because of concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in CYNK's common stock."
And while the SEC has been mum on whether it has uncovered any evidence of such manipulation, CYNK sure looks like a classic pump-and-dump scheme – albeit on steroids.
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.