Yahoo – AFP,
Luc Olinga, 10 July 2014
New York (AFP) - It has no assets, no revenues and no business plan to speak of. But a company called Cynk Technology has seen its value soar as high as $4.7 billion.
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| Traders work on the floor of the New York Stock Exchange on June 20, 2014 in New York City (AFP Photo/Spencer Platt) |
New York (AFP) - It has no assets, no revenues and no business plan to speak of. But a company called Cynk Technology has seen its value soar as high as $4.7 billion.
Wall Street
analysts have been at loss to explain the spectacular 24,000 percent rise in
Cynk, which trades on the lightly regulated over the counter (OTC) market.
While its
share price and market value fell at the close of trade, the company unknown in
the technology or financial communities for a time traded in the range of the
value of firms such as Groupon, Pandora Media or Yelp.
"We
must sadly conclude that the company is nothing but a fraud," said the
financial news website Zero Hedge.
"And
it is nothing short of a testament to just how broken this excuse for a market
is that a company with no assets, no revenues, no website and one employee can
go from zero value to nearly $5 billion in market cap in a few days."
The stock
trading at six cents on June 16 inexplicable surged to $2.25 the next day, and
rose to as high as $16 on Thursday, before slipping to around $14 at the close
-- making its paper value still an eye-popping $4 billion or so.
The company
avoided scrutiny until its disproportionate value drew the attention of Wall
Street veterans.
The phone
number listed on company documents was out of service.
Richard
Green of the market analysis firm Briefing.com examined the company's
regulatory filing, which indicated Cynk had no assets, no cash and an
accumulated loss of $1.5 million.
Cynk calls
itself a social network, based on its early incarnation as introbiz.com, which
offered to put people in contact with celebrities like Angelina Jolie or Johnny
Depp for $50.
"The
company is no more of a functional business than your average college student's
entrepreneurial dream," Green said.
"There
was no news or other recognizable event to explain such stock trading
activity."
Analysts
note that the market value is merely on paper, based on trades of a small
number of shares.
"We
want to stop short of directly calling Cynk Technology a 'scam operation,' as
we have not yet been able to find a reason for the unusual trading, but it
certainly has all the appearances of the typical 'pump and dump' scheme used to
deceive ignorant investors into buying into 'the next social media'
giant,'" Green added.
One concern
is that certain "momentum" investors who use algorithms to trade can
be attracted to the stock simply because of its rise.
"There
is no rational explanation for yesterday's trading activity and the $4 billion
market capitalization," Green said.
"In
short, Cynk has 'stynk' written all over it and we think the best approach to
this stock is to avoid it entirely."
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