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U.S. regulators are embarking on the stock version of the whack-a-mole – the race to suspend the shares of companies with questionable prospects that have been hypnotized on social media.
In a statement on Friday, the Securities and Exchange Commission said it had temporarily halted trading at 15 companies over fears their stock prices had been artificially inflated.
“We proactively monitor suspicious business activity related to stock market promotions on social media, and act quickly to stop such transactions where appropriate to protect the public interest,” said Melissa Hodgman, Acting Director of the Business Unit. SEC enforcement.
The SEC crackdown adds to the fallout from GameStop Corp.’s frenzy, in which an army of day traders has banded together to drive long-overlooked actions to the stratosphere. The regulator has consistently sought to remove dying companies from stock exchanges because it fears retail investors may suffer losses, but that effort has accelerated amid this year’s wild trading.
In Friday’s action, regulators are venturing further into one of the noisiest parts of the market, targeting penny stocks dragged into price and volume frenzies by relentless social media pumping. Frantic trading, often at non-profit companies, on lightly regulated broker networks is perhaps the most extreme example of speculative excess in the 2021 market, a landscape that has also included the cryptocurrency surge. and the craze for special purpose acquisition companies.
Two weeks ago, the SEC suspended trading in SpectraScience Inc. – a company that had jumped from 633% in 2021 to just over two-tenths of a cent before the shutdown. The SEC order noted that while the company has not filed reports in years and its phone number is not working, “social media accounts may be engaged in a coordinated attempt to influence artificially.” the course of its action. SpectraScience volume topped 3.5 billion shares in a single day at the end of January as the share jumped 167%.
None of the companies suspended on Friday have filed information with the SEC for more than a year. Under federal securities laws, the SEC can ban trading for 10 days and prohibit a broker from soliciting investors to buy or resell shares until certain reporting requirements are met.
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