Shares of Cynk Technology ($CYNK) crashed on Friday after the SEC lifted a trading ban on the stock following weeks of suspicious action. Despite an 84% decline on Friday, shares still have much more room to fall, and it’s unclear what is still supporting the stock at $2 per share.
Cynk is a small social media company that trades over-the-counter (OTC). After the stock rose 36,000% in a matter of weeks and gained notoriety throughout the financial world, the company reached a $6 billion valuation. Surely with a valuation higher than Domino’s Pizza (DPZ) , Dreamworks Animation (DWA) , Spirit Airlines (SAVE) , Yelp (YELP) , U.S. Steel (X) , and Puma Biotechnology (PBYI) , CYNK must be doing something right – perhaps the business model is clever or the company was subjected to takeover rumors?
In reality, Cynk is essentially worthless. It has one employee, no assets, no revenue, and a website that looks like it could have been made in an intro-level college web design course. The corporate address is listed at 1 Coney Drive, Suite 400, Belize City, Belize – a location where Cynk may or may not have an office. The company has a listed phone number on the OTC exchange, but it does not answer calls.
In sum, it’s fairly unknown what the company actually does, other than “allow individuals to post a profile and link their friends and organizations,” per the company website. The action in the stock was suspicious to say the least, so the SEC banned Cynk from trading between July 11 and July 24 to investigate and prevent any more damage. When the SEC removed the floodgates, Cynk crashed to 84% to $2 per share, more than 90% below its all-time high on July 10.
Yet, the company’s valuation is still a whopping $600 million, a significant sum given that Cynk does no business. It’s hard to guess what is supporting the stock from reverting to its pre-rally price below $0.10 – perhaps all the shorts have been squeezed and all the stock has been sold that can legally be sold right now. Or perhaps shares are still being manipulated. It’s really anyone’s guess.
Cynk was surely a classic pump-and-dump, a contrived method to boost the value of a low-value stock to new highs and dump the shares for a massive profit. It’s unclear whether the pump-and-dump was an internal or external endeavor, as even Cynk’s corporate structure is muddled. Javier Romero is listed as the President, Secretary, Treasurer, and Director in a legal OTC document, but has denied being involved in the company.
Let Cynk be a reminder to investors to stay far away from suspicious action in low-quality stocks. Those who bought in in several weeks ago at the lure of quick triple-digit have now lost their shirt. Moreover, Cynk still has more room to fall, as the stock belongs closer to its pre-spike price around zero.
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