Rainbow International Corp (OTCMKTS:RNBI) Enters the Hemp Industry, Gets Pumped

About a minute before yesterday’s opening bell, PennyStocks.com, a promotional outfit often referred to as an affiliate of Awesome Penny Stocks, sent out an email saying that you should consider buying Rainbow International Corp (OTCMKTS:RNBI) immediately because, they reckon, it could be “the stock play of the century“. Really?

Taking the promoters’ word with a grain of salt might not be a bad call sometimes. After all, the same newsletter was pumping US Tungsten Corp (OTCMKTS:USTU) a couple of months ago and it’s fair to say that the campaign didn’t go down that well.

But let’s take a look at RNBI and see if this one will be any different. Not that long ago, the company was a shell and they had the intention of acquiring and developing mining properties. The plan didn’t work out and a couple of weeks ago, a new officer by the name of Donald Corn was put in place, he acquired 84% of the voting rights, and the company officially started working in the booming hemp industry.

There was no reverse merger as part of the business plan change which means that we can safely rely on the 10-Q covering the period ended February 28. We reckon that the figures speak pretty much for themselves:

• current assets: $47
• current liabilities: $82 thousand
• no revenue since inception
• quarterly net loss: $4 thousand

Despite the pumpers’ horrific track record and despite RNBI‘s devastating financial situation, investors listened to PennyStock.com’s email and jumped in yesterday. A record-breaking 8.5 million shares changed hands in just six and a half hours, resulting in a dollar volume of around $1.3 million. RNBI added a healthy 36% and closed the day at $0.1845 per share.

Undoubtedly, an impressive climb for a company that was a shell a couple of months ago and the people who timed their trades well probably walked away with a profit. But what about the ones who preferred to hang on to their holdings in the hope of a more prolonged run?

The risks are quite high. Just minutes before PennyStocks.com sent their email yesterday, another pumped company, Pingify International Inc (OTCBB:PGFY), felt the full force of SEC’s wrath. We’ve seen some other suspensions over the last couple of months and the hits were, more often than not, aimed at tickers that have just entered the pot industry.

And even if the Commission does decide to let the pump for RNBI play on, the prospects are not very good. As you can see, the $50 million market cap can’t really be justified by the figures in the financial statements. Let’s also keep in mind that an unnamed third party has splashed out $250 thousand for the promotion which means that they will probably want to get some of their investments back.

All in all, playing with promoted penny stocks poses quite a lot of dangers at the moment. As you can see from the chart on the right, tickers like Integrated Cannabis (OTCMKTS:IGPK) are obliterating money by the second. Considering all the risks carefully and doing a lot of due diligence before putting any money on the line is extremely important.