Borislav Tonev

Sovereign Lithium Inc (OTCMKTS:SLCO) Suspended!

by Borislav Tonev November 18, 2013
4SLCO.pngThe people who were part of the virtually constant promotional effort for Sovereign Lithium Inc (OTCMKTS:SLCO, SLCO message board) (formerly known as Great American Energy Inc) were having it easy. Countless campaigns worth millions of dollars resulted in lots of highs and lows and lots of profits and losses when the company was traded under the SRBL ticker. The same people probably thought that after changing the name and the trading symbol, things will be pretty much the same.

That is indeed what they thought and probably because of their beliefs, they decided to initiate a paper mailer campaign just a few months after the new ticker appeared on the market. Rumors about the brochure appeared last Tuesday and trading suggested that quite a lot of people were paying attention. It seemed as if this will be just the next in a long line of pumps carried out for the company. The SEC had other ideas.

On Friday, just three days after the first mailers hit investors' mailboxes, the regulatory organ decided to put an end to the campaign and suspended SLCO for two weeks. According to the order, there are "concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transaction in Sovereign Lithium's stock". Bad news, but is there anything surprising about the SEC action?

Not really. If you have a look at our article on SLCO, you'll see that we tried to warn our readers about a potential interference twenty-four hours before the order was published and we sincerely hope that most of them have managed to get out on time. But what about the traders who got caught off-guard? What does the future hold for them?

Well, unfortunately, things are not looking good. SLCO's OTC Markets profile has already received the Caveat Emptor badge and although trading will reopen on November 29, the company will be quoted on the Grey Market which is often referred to as "a graveyard for penny stocks". There is a reason for the rather grim description.

For one, tickers that end up there rarely get the chance to get back to the OTC QB or even the Pink tiers. The liquidity is 4PWEI.pngseverely affected as well and since there is no centralized quotation system, trading resembles shooting in the dark. SLCO's credibility (which was somewhat shaky to begin with) will also be shattered by the skulls and crossbones designation which will remain on the company profile even after the suspension is lifted.

The really big problem for the people who currently have some SLCO stock, however, is the share price. The SEC has been relatively active in chasing the bigger promotions in Pennyland over 4PCWT.pngthe last few months and SLCO's pump is definitely not the first one to get the axe.

Among the more recent examples are PacWest Equities, Inc. (OTCMKTS:PWEI), Pacific Clean Water Technologies, Inc. f/k/a Unseen Solar, Inc. (OTCMKTS:PCWT) and Press Ventures, Inc. (OTCBB:PVEN). Prior to their suspension orders, the three tickers were registering some quite healthy trading volumes while the constant promotional effort meant that the share prices 4PVEN.pngwere flying sky high. As you can see from the charts on the right, however, it all fell to pieces as soon as the punishments expired.

It is almost certain that SLCO will follow in their footsteps which means that quite a lot of people will lose money. Hopefully, cases such as this one will serve as proof that playing penny stock promotions can be really, really painful.

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