Why would this kind of penny stock increase so much in value?

Question

I was looking into the stock values of some stocks worth less than a $1, and one of the stocks I found was this Cyberfort Software Inc, which according to this TradeKing chart has increased from 0.10 cents/share November 2016 to little over 0.40 cents/share.

Now this is a company that according to this page (mentioned at the bottom of the page) at OTC Markets was known as "Patriot Berry Farms, Inc" (until November 2016) and before that as "Gaia Remedies, Inc" (until February 2013).

Their name change is also mentioned on this page which also seems to display their previous corporate logo.

Looking at the previous company names, this does not strike me as a company that is very well versed in IT security (as their newest name might imply).

So looking at a company like this, I am curious about whether the value of this company could be artificially inflated (what I have heard about "pump and dump" schemes).

The questions I have:

1. Is it possible to artificially inflate stocks?
2. Are there natural limits (such as proportion to the beginning stock value) to how much a stock could be artificially inflated?
3. Does it require a fair amount of research for an investor to recognize an artificially inflated stock (not just a penny stock)?

Answer 1

Well I'm not going to advise whether it's a good idea to invest in this company (though often OTC is pretty scary), but it DOES have a product (vivio, an ad blocker), it did post financials and it's trading on the OTC-QB (which is better than the pink sheets), so you need to look these over and study up on the product to decide if it is overpriced or not. What might have occurred (viz the Patriot Berry Farm becoming Cyberfort) is that the latter bought up the stock of the former (this is, I believe, called using a shell, which is not necessarily a bad thing) and is using this as a way to be registered, i.e. sell to non-accredited investors via the OTC market. So I'm really just answering your third question: yes, you have to do a lot of due diligence to see if buying this stock is a good deal or not. It might be the next big thing. Or it might not.

It certainly is the case that low trading volume allows a relatively small trade to really change the stock price, so the penny stocks do tend to be easier to 'inflate'.

Side comment: the bid/ask spreads are pretty big, with a best bid of 0.35 and best ask of 0.44.

Answer 2

Disregarding the particular example and focusing on the actual questions:

1. Is it possible to artificially inflate stocks?

YES, definitely, the whole concept of "pump and dump scheme" refers to the many cases when this was intentionally done;

2. Are there natural limits (such as proportion to the beginning stock value) to how much a stock could be artificially inflated?

Everything has a limit, but the limit can be quite high, especially if starting from a low value (a penny stock) and if the stock is low volume, then inflating ten or hundred times over a real value may be possible; and any value might be infinitely times overvalued for a company that turns out to have a value of zero.

3. Does it require a fair amount of research for an investor to recognize an artificially inflated stock (not just a penny stock)?

Yes, unless it's done very blatantly, you should expect that the "inflator" has much more experience in hiding the signs of inflation than the skill of average investor to notice them.