After a stock analyst lost $1 million on one penny stock, he set off to find out how — and soon discovered signs of a far bigger scheme than he had ever imagined.
CHRIS DIIORIO HAD just lost a million dollars.
This was back in 2006. DiIorio, who was 39 at the time, had recently moved with his new wife from Boston to Castle Pines, Colorado, a leafy suburb of Denver, and was toiling in finance as a market researcher, analyzing the financial statements of public companies and giving recommendations to portfolio managers.
He had previously worked on Wall Street as an institutional equity trader and research analyst for a subsidiary of the now-defunct investment bank Donaldson, Lufkin, and Jenrette. He had 13 years experience executing massive trades for large mutual fund clients like Fidelity and Putnam.
But in his new life, DiIorio happened upon a technology company called E Mobile (symbol: EMTK), a small computer chipmaker that claimed to hold patents on an antenna-type Wi-Fi router and other products. He reviewedcompany press releases, as well as investor chatter online claiming that E Mobile’s chips were provoking interest from Chinese content companies.
E Mobile didn’t trade on the New York Stock Exchange or Nasdaq, however. It was an over-the-counter stock, traded on an electronic exchange called thePink Sheets that is home to what are commonly called “penny stocks.”
A penny stock is actually any equity that trades for $5 a share or less. But many shares can be had for a literal penny, or even a fraction of one. They are purchased on the Pink Sheets and the over-the-counter Bulletin Board market, through your regular brokerage account.