The Securities and Exchange Commission may be looking to head off future social media-driven stock trading frenzies. On Thursday morning, the commission suspended trading in a “pink sheets” stock that has been the subject of hype on Twitter and other social media platforms.
Since January, according to the SEC, “certain social media accounts may be engaged in a coordinated attempt to artificially influence the share price of SpectraScience (OTC: SCIE), an inactive Minnesota-based corporation.” The share price and trading volume of SpectraScience shares have increased even though there was no publicly available news from the company, the SEC said.
SpectraScience is delinquent in its reporting, having not filed any periodic reports since 2017, and its most recent website and phone number don’t work.
Various web sites list SpectraScience as a company offering a system that uses light-based technologies to diagnose colorectal and other types of cancer.
The company’s shares still trade at a fraction of a cent. But with just 4.9 billion shares outstanding, the stock has an average 10-day trading volume of 874 million shares.
“This is a reminder that investors should exercise tremendous caution when investing based on social media or a sudden surge of enthusiasm for a particular security, especially where that interest does not appear tied to any news about the company or industry,” said Melissa Hodgman, acting director of the SEC’s division of enforcement.
The SEC statement on the ban referred consumers to a January 30 market-wide investor alert that warned of “the potential for market manipulation on online platforms.”
The GameStop shares trading frenzy subsided this week, with the stock dropping to the $50 per share range after hitting an intraday high of $483 per share two weeks ago.
Under the federal securities laws, the SEC can suspend trading in a stock for 10 days and generally prohibit a broker-dealer from soliciting investors to buy or sell the stock again until certain reporting requirements are met.
The SpectraScience trading ban lasts through 11:59 p.m. on February 25.