Paper Mailer Pump Sends Sovereign Lithium Inc (OTCMKTS:SLCO) Flying

$600 thousand worth of Sovereign Lithium Inc (OTCMKTS:SLCO) shares got traded during yesterday’s session. That’s an astonishing number considering the fact that the ticker has been on the market for only three and a half months. The price also soared by as much as 53% in just three days and if you’ve been around penny stocks for long enough, you know that these sort of runs don’t just occur out of thin air.

Before we get to the reasons for the impressive chart movement, we would like to draw your attention to the company history. The ticker may indeed be new but the enterprise has been on the OTC Markets for quite a while.

Prior to July, it was called Great American Energy Inc, it went under the ticker symbol SRBL, and it was one of the most heavily promoted penny stocks for 2013. More than one hundred and sixty emails hit our inbox between February 18 and July 11. Predictably, the stock suffered a massive fall and even when the name change was announced and a “D” was added at the end of the ticker, the pumpers didn’t give up. More emails and landing pages were set up in an attempt to lift the price off the ground but instead of doing that, it pushed it further down.

All in all, a pretty disappointing performance and something worth bearing in mind when you are making your decision. Still, you’re thinking, the ticker is now new, there are no emails in our database, and, as long as things remain like that, it should be plain sailing, right?

Not quite. As we mentioned in the first paragraph, surges in the green direction such as the one displayed by SLCO rarely happen for no reason and when you do a bit of digging around, you’ll see that a number of traders on Twitter and around message boards are saying that they have received colorful brochures touting the company as a great investment opportunity. Apparently, the hard mailer was prepared by the infamous James Rapholz who has received $736,678 for his optimism.

And we can definitely say that he is optimistic. He claims in the brochure that SLCO will be bought out by Ford Motor Company (NYSE:F) for $11.25 per share. Theoretically, this could happen, but let’s say that there are plenty of things to suggest the opposite.

Back in April 2011, Mr. Rapholz said that Liberty Coal Energy Corp. (OTCMKTS:LBTG) “could fetch $45 per share“. Yesterday, LBTG “fetched” $0.0005 per share. In June, he pumped National Graphite Corp (OTCMKTS:NGRC). Five months were enough for NGRC to wipe out around 85% of its value.

The list of penny stocks promoted by Mr. Rapholz and his Economic Advice newsletter is really rather huge and his dealings in the past has led to some legal problems. He received a cease and desist order from South Carolina’s Attorney General back in 2009 and he also had some trouble with the SEC. RipOffReport.com entries such as this one suggest that some investors aren’t particularly fond of him as well.

With all these things in mind, we’re struggling to see SLCO sustaining a more prolonged run. What’s more, there are some signs that the SEC are starting to pay closer attention to penny stock promotions. The pumps for PacWest Equities Inc (OTCMKTS:PWEI), Pacific Clean Water Technologies, Inc. f/k/a Unseen Solar, Inc. (OTCMKTS:PCWT) and Press Ventures Inc (OTCMKTS:PVEN) were cut short by the regulatory organ when they decided to suspend the stocks. SLCO‘s long promotional history and Mr. Rapholz’s infamy mean that a potential interference from the SEC won’t be at all surprising which is why treading extremely carefully is absolutely crucial.