Shares of Zomedica (NYSEMKT:ZOM) were surrendering a sizable portion of their recent gains on Wednesday. As of 3:13 p.m. EST, the veterinary healthcare company's stock price was down by more than 22%.
News broke on Tuesday that Carole Baskin, star of the hit Netflix reality show Tiger King, was paid to promote Zomedica in a video posted on YouTube. In the days since that video was posted last week, Zomedica's stock price more than tripled.
But reportedly, Baskin received $299 to speak highly of the company through an online service called Cameo, which allows people to pay celebrities for brief personalized video messages.
On Wednesday, traders appear to be taking the revelation that Baskin's mention of Zomedica was a paid endorsement -- and it's still not known who paid for it -- as a cue to take their profits and head for the exits.
Penny stocks are particularly prone to price-manipulation schemes. Stock promoters use all manner of methods to temporarily pump up these small companies' shares, then sell before the inevitable correction. Traders who get in on such roller-coaster rides early can make big profits, but those who buy later often suffer gruesome losses when the promoters move on to other stocks. This is not a game long-term investors should play. There are far easier and safer ways to build wealth in the market.