If you get this spam email - delete it! Quick!
The spam filter on my email account is robust. I usually never see any – either internet service provider TalkTalk is very efficient or somehow I've set the software to auto-destruct mass mailed garbage. So no Viagra, no fake Rolexes, and no dodgy brides.
But recently, I've been hit by several pieces of spam, all with the same text. Addressed to me not by my name but as ‘Dear Traders’, the emails come from a variety of made-up sender names, and headers such as “re: red hot stock alert!” and “re: September market portfolio”.
And I'm not the only one. US investor message boards are humming with the spam – all sent out in the past few days.
So what does it say? It pushes a stock with code GRDC (Grid Cloud Solutions).
This is traded on the US over the counter market at the amazing price of one cent. Well there are 190 million shares. Now for some reason, and the company itself has nothing to do with this spam or any of the supposed facts in it, the sender says it will go to 55 cents a share. That’s not five but 55 times, making, if it was true, the “strong buy” label a real understatement.
If I could be sure a share would multiply 55 times, I’d ransom my granny.
The end of America as we know it
Why would anyone believe this? The reasoning in the email comes from some sort of Fox News parody. Here’s a taster.
“It's time you heard the truth about our economy and our country. Your family, your future and your fortune depend on it. The end of America as we know it is upon us.
As with the fall of any great society, it's hard to know what exactly will knell the death blow. But unless you have been living under a rock, you know about the record deficits, dysfunctional government, skyrocketing food prices, and a plunging dollar, as well as the China menace, the housing collapse, and gold headed for $2,000 an ounce isn't helping matters.Our country is going to hell in a hand basket. Surely you know this. It's all over the TV, newspapers, magazines, the radio. But here's the most shocking news of all....It's all a bunch of B.S.!”
Salvation can only come, it says, buying into the one small company that could be your life raft in this sea of red ink, GRDC. It goes on and gets worse.
“Our ingenuity invented the car, cured polio, sent a man to the moon and created the Internet. It gave us the iPod, laser surgery and GPS systems. Now that same ingenuity will help us solve the biggest challenges we face-and GRDC's shares could launch your personal fortune while everyone else is running for the hills!”
And there’s that promise of every pyramid sales huckster – “financial freedom”.
So what do we know from the company itself. It’s a small start-up with revenues of under $1m a year. It makes a very small profit – around a hundredth of what it would need to justify the target price. The company itself has far more modest expectations. And it has no connection to the spammers.
It provides services to green industries. It says: “The Company's business plan is tailored after the business models developed by service providers in the petroleum industry who are focused on providing solutions to complex problems as they emerge.”
The spam mail mentions a dividend – but that’s just an issue of more shares. Start-ups can’t afford cash.
Who are the spammers?
Who are the spammers? They’re paid by investors who already own shares and want to get rid of them. This is called “front-running” and it’s illegal in the UK – it was prevalent during the dotcom boom in 1999 when investors would buy shares and then recommend them to everyone else.
But if they really believed this stuff, they could sit and wait until the value rose naturally.
But while it’s easy enough to buy these shares, selling is another story. These are “restricted” shares under rule 144 which means ordinary investors can’t sell them for at least a year.
There’s an old stock exchange saying which is always apt. “Where there’s a tip, there’s a tap.” That means that anyone tipping a share has some reason to do so – in the case of small companies, that often means they can turn on the tap with stock they want to unload.
Remember that saying the next time you get a spam share tip.