Rainbow International Corp (OTCMKTS:RNBI) Slips, Pump Continues

As you probably know, on January 1, the state of Colorado allowed the legal use of recreational marijuana and this caused quite a stir among penny stock investors. A couple of months ago, all a company needed to do if it wanted to get its stock in the spotlight was issue a press release which contained the words “cannabis”, “marijuana” or “hemp”. Now though, things are a little bit different. The majority of the so-called pot stocks are not doing particularly well and it seems that the enthusiasm has dissipated somewhat. This presented a problem for Rainbow International Corp (OTCMKTS:RNBI) who decided to enter the cannabidiol business on May 1.

An unnamed third party wanted to help and decided that what the ticker needed was a pump. The aforementioned party paid $250 thousand and PennyStocks.com rose to the challenge of promoting RNBI.

As we mentioned in our previous articles, there were quite a lot of things to deter the more risk-averse investors from the company. PennyStocks.com is often referred to as a partner of Awesome Penny Stocks (one of the most infamous promotional outfits) and their track record is not exactly spotless.

What’s more, RNBI doesn’t really have the financials to justify the market cap which is currently hovering around the $54 million mark. Here’s a summary of the most important figures as found in the latest 10-Q:

• NO cash
• NO revenue since inception
• current assets: $47
• current liabilities: $82 thousand
• accumulated deficit: $342 thousand

Despite the red flags, the pump was off to a decent start. The campaign began on May 14 and it immediately brought two sessions of heavy buying during which the ticker managed to generate more than $2 million in cumulative dollar volume and 76% in price gains. On Friday, it slipped by around 14% and closed the week at $0.20, but apparently, PennyStocks.com aren’t too bothered about the correction. Yesterday, they sent out another email saying that they’re pretty happy with the performance so far. Apparently, they reckon that this is just the beginning. Is that the case, though?

Only time will tell, but we should note that RNBI is in an extremely dangerous position at the moment. On the one hand, you’ve got the paid pump which is enough of a red flag on its own. Someone has paid a quarter of a million dollars in order to artificially inflate the price which means that they will probably want to profit from the whole thing.

On the other hand, you’ve got the threat of a potential intervention from the regulatory organs. Numerous newly-born pot stocks received temporary suspensions from the Securities and Exchange Commission over the last couple of months and Growlife Inc (OTCMKTS:PHOT)’s order showed that even the industry veterans are not safe.

On Friday, Fusion Pharm Inc (OTCMKTS:FSPM), another pot stock, got the axe and the SEC officially warned investors about the dangers associated with such enterprises.

The pump and the new business plan make for a potentially explosive combination. Considering the risks carefully is absolutely crucial.