Pump and Dump
A pump and dump is a fraudulent method used to push a stock up via manipulation.
Pumping and dumping of stocks is a regular occurrence in the stock market. It is most prevalent on the Over the Counter Exchange and Nasdaq where low float small cap stocks are common, but it can happen with larger stocks on NYSE as well (just takes bigger money players). These type of stocks are easy to manipulate because it takes less capital (since the stock price is much lower) and the floats are often tiny (less supply).
The Pump: The pump is often orchestrated by sending out newsletters or mailers touting a specific stock. Often times the information is very misleading and designed to suck people in. Some sort of press release is usually generated by the company and aids the scam to give it some legitimacy. These days social media can play a big roll. Websites like Stocktwits.com and Twitter.com, trading chatroom's, and even fake landing pages can be highly effective. There are often times paid pumpers on message boards and algorithms will pick up on the social media activity and drive the stocks even higher. These days algorithms and can read social media and are instructed to pay attention. Some sort of bigger fish is usually behind the scheme and may push it up with buying in order to get it on traders radars. Stocks with small floats and high short interest are often targets because they make great squeeze candidates. Low float bio stocks looking to do public offerings and shady reverse merger China stocks are common targets for this type of activity.
The Dump: Once a stock has been artificially driven up via manipulation, the perpetrators have to take their profits and dump on the unsuspecting retail traders that begin to chase the stock due to the big price action. Newbie traders are often sucked in as they assume the stock will continue to go higher. Pumpers count on these "sheep" to buy their shares once the price is driven up as they need someone to sell to at the bloated price. They also look to squeeze shorts by forcing them out of their positions as they must buy to cover in order to exit. The people that run these shams are nasty and in my view are lower than pond scum. They basically are preying on and stealing from mostly small traders who don't have a lot of "mad money" and really cant afford to lose. Other possible perpetrators that may be involved are brokerage firms (generally smaller firms) and even the exchange themselves.