What does a pump-and-dump stock mean?

In a pump and dump scheme, fraudsters create a buying frenzy by spreading false or fraudulent information in order to "pump" up the price of a stock and then "dump" shares of the company by selling their own.

When the fraudsters sell their shares and cease advertising the stock, the stock price typically falls and investors lose money.

The spread of false or incorrect information about a firm's stock price may occur through channels such as social media, investment research websites, online advertisements, investment newsletters, email, direct mail, Internet chat rooms, magazines, newspapers, and radio.

Microcap firms, in particular, are vulnerable to pump and dump schemes due to a lack of publicly available information about them.