Costa Mesa communications company Harrison Digicom Inc. said Friday it has been the victim of a stock manipulation scheme that cut its shares to less than half their original price.
Harrison, whose stock trades over-the-counter, said it put on hold a $1-million private placement when it discovered that a company taking part in the placement was using an offshore brokerage firm to dump the stock and drive down the price so it could be bought cheaply.
John Bush, president and chief executive of Harrison, declined to name the brokerage firm, the selling company or any of the other parties involved in the private placement, citing a fear of potential litigation.
Bush also said that Harrison has not notified the Securities and Exchange Commission about the alleged manipulation because it does not come under the SEC's reporting requirements. An SEC official said the agency was unaware of the allegations.
Bush said the company made its disclosure Friday to explain the stock's recent slump to shareholders.
Between Dec. 15 and 24, the stock steadily fell from $1.31 to 53 cents on unusually heavy trading, although the company did not disclose any news. Volume more than doubled during that period, hitting as much as 76,100 shares Dec. 23. The stock has since recovered, closing Friday at $1.25, up 25 cents a share.
Bush said the company traced the activity to a company participating in the placement. Under terms of the placement, the company would have been allowed to purchase stock at a discount, he said, adding that the unnamed company is no longer participating.
The placement is back on track and fully subscribed, Bush said. The company will draw on the funds over the next month, in part to hire an accounting firm and do the paperwork to become fully registered with Nasdaq, he said.