Cynk Tech plummets 85 percent as trading suspension ends
NEW YORK (Reuters) - Cynk Technology shares plummeted to close down about 85 percent on Friday after a trading suspension was lifted, but the stock was only being exchanged in private deals.
The plunge largely reversed a rally that saw the stock rise more than 20,000 percent in a matter of weeks, hitting an intraday high of $21.95 on July 10, a day before regulators stepped in to halt trading, citing concerns about manipulation.
Based in Belize, Cynk became one of the market's biggest stories as volumes soared and the social media company briefly became valued at more than $6 billion, despite having no revenue and being described as a "development stage" company.
Brokerages can trade in a company whose shares were previously suspended in the so-called “grey market,” but only at buyers’ or sellers’ request. Firms are not allowed to solicit orders.
Given the stock's history, the fact that it was still trading at a price high enough to make it worth $600 million was a surprise to some.
"The stock should be trading near zero to pennies," said John 'Chip' Buckman, managing director at Buckman, Buckman & Reid, a Shrewsbury, New Jersey-based brokerage firm, which had held a short position in the shares before the suspension.
"I would guess there's been so much action in the stock that it’s still getting some play from investors."
Buckman said he didn't know if the position the firm held in Cynk had been closed and said traders wouldn't be able to comment on that until after the close of trading Friday.
Cynk shares ended down 85 percent at $2.10, with 563,000 shares changing hands.
Before mid-June, the stock had only traded a handful of shares on three days in 2014, but volume exploded in what some suspected was a "pump and dump" scheme where investors talk up little-traded stocks in order to inflate their value. In this case, short-sellers were caught with losses due to the lack of liquidity in the shares as the stock soared.
One of those who lost money was Tom Laresca, who claims he lost his job at Buckman, Buckman & Reid after he was unable to cover his short position in the shares as losses increased. The firm said he did not manage his position properly.
OTC Markets Group, where the stock had traded prior to its suspension by the U.S. Securities and Exchange Commission, was not used for the trades, a spokeswoman for OTC Markets said.
The Financial Industry Regulatory Authority had halted trading in the stock just before the SEC.
The company was previously known as Introbuzz, and had an office in Las Vegas, according to Regus, the management firm that rents space in the business center where Cynk was located. However, Regus said Cynk left in June.
Meanwhile, the company's listed address at the Matalon, Coney Drive, Suite 400 in Belize does not have a Suite 400, a receiptionist there told Reuters two weeks ago.
(Additional reporting by Suzanne Barlyn; Editing by Bernadette Baum and Nick Zieminski)