Lot78, Inc (OTC:LOTE) Can Fall, After All

All our cautionary tales about Lot78, Inc (OTC:LOTE) finally came true, as $3.60 seemed to be the highest some investors were ready to go before selling off. Around 5 million shares flooded the market yesterday, and the stock lost 23%, returning to $2.72. Despite the promising designer Ollie Amhurst at the helm of the fashion company and the increasing exposure of the brand, the market worked on its own rules and profit-taking cut the trend after a few extremely strong days. 

Lot 78, a relatively small fashion company, hardly has enough potential to sustain a 200 million dollars market capitalization. The brand is getting more publicity, but still no worldwide recognition outside several high-end fashion sites, and the press releases and hype have one task: to affect the stock markets.

Where LOTE will go from here is hard to predict- new press releases and a promotion could continue the upward trend, or the next few days could make a bigger correction. Most of the buying happened between $1.00 and $ 1.50, so those investors could be eager to take profits. Also, most of the stock’s growth was triggered by a paid promotion, plus a series of press releases, causing disproportionate interest and higher bidding.

Lot 78 showed up on the OTC markets through a reverse buyback, taking the place of Bold Energy, Inc. (BOLD) to gain exposure to American markets. The ticker started with an unusually high price for a penny stock, perhaps hoping for a buyout, but held a lot of the traits of a pump scheme. Before any big buyer became enamored with the London fashion house, many small investors bought it for the stock’s potential.

The former company held few resources, and we still don’t know how Lot 78 will contribute to the bottom line. Here is what Bold Energy brought to the table:

• Zero revenues

• $38,000 net loss

• Zero cash, $1,000 “goodwill” assets

• $84,000 total liabilities

The London company may be independent and to be covering its expenses well, but selling a few jackets is not enough to sustain the ticker. Other fashion companies have risen to awesome heights when their clothes were worn by celebrities, so this is an example how mere hype can create gains, which may not be supported by real sales and growth potential. And so far, Lot 78 works with small and quite limited collections.