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Boiler Room Business Articles | January 8, 2010 Normal 0 false false false MicrosoftInternetExplorer4 st1\:*{behavior:url(#ieooui) } * Style Definitions *...
A boiler room in business is some sort of fraud, where the term boiler room refers to a hot focus of activity Cheap Air Max Tailwind , often selling questionable goods by telephone. It usually means a room where salesmen work using unfair, dishonest sales techniques, sometimes selling penny stock or committing outright stock fraud. The term has a negative meaning, and is often used to imply high-pressure sales techniques and sometimes Cheap Air Max Tailwind IV , poor working conditions.
Business structure
A boiler room usually has a hidden relationship with the company being promoted or hidden profit from the sale of the house stock they are promoting. When a small company needs financing, it looks to an investment bank to raise capital. Usually this is a legal procedure but most boiler rooms perform this function for fake companies. After the managers of the boiler room invest money via the phony company or shell, they can either (A): Underwrite an initial public offering (IPO) or (B): back the phony company into a "shell" an out of business company that is no longer working, usually on the OTC Bulletin Board or the Pink Sheets that carry many small and thinly traded stocks.
The managers of the boiler room usually have close connections to the same owners of the company whose stock is being promoted. After the sales force of the boiler room sells their clients on the idea of the IPO Cheap Air Max Tavas , they can not sell the shares that the customer invested, simply because there is no actual "market" for the shares, so any shares sold for buyers are gathered so it would create a large loss in the price of the stock, due to it being thinly traded with no public support. Once the spying investors are in place Cheap Air Max Thea , a boiler room promotes (via telephone calls to brokerage clients or spam email) these thinly traded stocks where there is no real market. The brokers of the boiler room typically "create" a market by attracting buyers, whose need for the stock increases the price; This gives the owners of the company enough space to sell their shares at a profit, a form of pump and dump operation where the original investors profit on the account of the investors taken in by the boiler room operation.