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Cynk suspension ending, but shares unlikely to trade

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A trading suspension in the stock of little-known Cynk Technology, which mysteriously surged 20,000 percent before the halt, ends late on Thursday, but do not expect to see the stock trading again on Friday.

Shares of the Belize-based social media company, which were traded on over-the-counter exchanges until the suspension on July 11, soared over a few weeks despite having no revenue and being described as a "development stage'' company. At one point, Cynk was worth more than $6 billion.

The swiftness of the rally in what had been a little-traded penny stock prompted a temporary suspension by the U.S. Securities and Exchange Commission that expires at 11:59 p.m. EDT Thursday.

Read More Why CYNK is different from 'Wolf of Wall Street'

The suspension was implemented to protect investors, according to the SEC. Since then, there has been no comment from the company nor regulator, and no new information has emerged to explain the stock's meteoric rise.

As the suspension expires, brokerages said the chances of the stock resuming trading are slim at best.

More than likely, the stock will only ever again trade in the so-called "gray market,'' because no brokerage firm is likely to be willing to make a market in the shares. Without a broker to quote or advertise the stock, it can be nearly impossible to locate shares to trade.

Brokerages wanting to market the stock must file a form with FINRA, explaining that they are satisfied with any updated information.

Cromwell Coulson, president and chief executive at OTC Markets, expects no brokerages to file the required paperwork for Cynk to trade on exchanges, a spokeswoman told Reuters.

Among the investors hurt by the sudden rally were those shorting the shares - borrowing and selling in expectation of it dropping. That can be dangerous with stocks that have little liquidity, like Cynk, that go on a sudden run. Shares at one point hit $21.95 on July 10 before closing at just below $14 that day, the last day it was traded.

Read MoreWhat's next for CYNK traders and promoters?

A pump-and-dump scheme involves a group of insiders who conspire to drive up a stock's price, then lure in unwary outside investors to buy the shares at an inflated price and abscond with the proceeds.

The SEC and the Financial Industry Regulatory Authority, or FINRA, which imposed the suspension, both declined to comment on Thursday.

Regulators, nonetheless, typically do not take long to investigate the types of concerns surrounding Cynk, said Andrew Stoltmann, a lawyer in Chicago who represents investors in securities arbitration cases.

Read More Penny stock soars to $6B, and even the auditor is perplexed

An investigation that extends beyond Aug. 1 would be surprising, Stoltmann said.

Regulators rely on trading records to determine the firms that originated the trades, Stoltmann said. "It's a relatively simple process to figure out.''

By Reuters

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