Concerns about the Ebola virus and Middle East Respiratory Syndrome (MERS) have spread beyond the places where people have been infected. Wall Street has been exposed to them, so to speak, as investors speculate about where the next big thing is going to be. Now the Financial Industry Regulatory Authority (FINRA) is warning investors about schemes involving companies that supposedly have cures for these deadly diseases.
Tekmira Pharmaceuticals Corporation (NASDAQ:TKMR) is the perfect example of how Wall Street is being affected by the Ebola virus scare. It should be noted, however, that Tekmira is a legitimate company that’s working not only on a treatment for Ebola but also other diseases like Hepatitis B. Shares of the drug maker surged more than 9% again today as investors speculated that the company’s Ebola virus treatment is going to receive a boost from the outbreaks and take off. Tekmira stock has been extremely volatile of late, as investors run hot and cold on the company’s prospects in Ebola treatment. But the fact of the matter is that it’s still very early in Tekmira’s development of the treatment, so investors are clearly unsure about it.
Of course it’s anyone’s guess whether it will be Tekmira or any of the other companies that are working on treatments for Ebola that will be the big winner in the end—or whether none of them will win because it will not reach pandemic proportions.
Warning about Ebola virus scams
Today FINRA issued an Investor Alert titled “Viral Disease Stock Scams: Don’t Let Them Infect Your Portfolio.” The agency is warning about promotions that push stocks in companies “that claim to provide products that protect against the spread of viruses or other harmful diseases.” The alert further adds that regulators know of “several” possible scams involving companies that claim to be developing products that will keep viral diseases from spreading.
“News coverage of Ebola and Middle East Respiratory Syndrome (MERS) is likely to catch the interest of ‘pump and dump’ scammers looking to capitalize on fears of a potential pandemic,” said Gerri Walsh, FINRA’s Senior Vice President for Investor Education, in a statement. “Investors should be very cautious of any company that claims it is poised for dramatic growth as a result of a purported cure or treatment for high-profile viral diseases.”
Avoiding possible pump and dump schemes
Regulators provided some tips for investors to avoid being taken in by potential pump and dump schemes. First, they suggest that investors consider the source of the information they receive. Second, they recommend doing some research before investing in a company. Third, they said a giveaway that a company might be a scam is if it keeps changing its name or business focus. And fourth, they said companies that say they have a relationship with a government agency or a well-known company or university may only be trying to create legitimacy that isn’t warranted.