The Self-Inflicted Pump Job of Rainbow Coral Corp (OTC:RBCC)

As set out in its latest quarterly report, Rainbow Coral Corp (OTC:RBCC) will most likely not be able to generate any revenue from its business by March 31, 2013. This situation must have made managers use their imagination in looking for alternative ways to make the stock more attractive and expensive on the charts. Instead of taking on a more creative approach, however, they have decided on investing $50 thousand into a promotional campaign in favor of the stock.

Of course, this decision has its logical prerequisites. On the one hand, RBCC shares have been on a steady downtrend for at least six months (see the accompanying chart) and no corporate move has proven good enough to buck this trend. On the other hand, the company adopted a full-blown 2012 stock option plan aimed at attracting highly qualified and experienced directors, employees and consultants by providing them with ‘a continued proprietary interest’ in the presumable success of the company. In addition, a lot of the company’s creditors have converted their notes into millions os shares of common RBCC stock over the last few months.

As a result, we have an army of directors, officers, external consultants and creditors holding large stakes in RBCC and willing to sell it at a profit should the opportunity arises. Coincidentally or not, a paid promotion is solely aimed at ramping up the market value of the stock, and it is the company’s managers that have provided the money for the campaign. So feel free to make your own conclusions about RBCC.

As it turned out, however, the company’s management spent money for nothing. Yersterday, RBCC opened at $0.465 barely gapping up 8% and never managed to go beyond this quote. On the contrary, the stock lost ground quickly and eventually closed at $0.39, down 9% from its pre-promo close.

There might be many reasons why the promotion turned into a fiasco, yet we will lay emphasis on two basic aspects:

• the misleadingly optimistic outlook of the company’s most recent press releases which have not brought about any material benefits so far and
• Quality Stocks’s notorious historical pumps record which is full of failed attempts to keep the market value of the corresponding stock above water for more than a while.