A couple of weeks ago I received an impressive, fancy, full color, glossy 12 page brochure on the “Global Hunt” for the “Next Oil”, from an outfit called the Stock Market Authority, in my mailbox. The front page claimed “Early-in investors in this one stock pick could turn $10,000 into $100,000!” WOW!, that was enough to get my heart pounding. What was the subject of all this excitement? What was going to change the world and make me rich? Lithium.
If you are reading this piece you may have received the same impressive brochure that touts the merits of the “ONE Company” that “Sits on a Multibillion-Dollar Bonanza”, Lithium Exploration Group (LEXG.OB) …yada, yada, yada. Among the additional hype (i.e., the yada, yada, yada) spread across this brochure were the following eye popping, excitement grabbing headlines:
- “A Worldwide Battle to Control This Wonder Substance”
- “Limited Supply vs. Unlimited Demand…”
- “The Mad Rush for the Third Element”
- “The Electric Car Revolution… Starts Now”
- “Every Automaker Will Soon Need Lithium”
- “ONE Company Sits on a Multibillion-Dollar Bonanza"
- “LEGX Will Turn the Energy World on Its Head”
- “LEGX Sitting on the Twin Mother Lodes of Litium”
- “The Government is Throwing Gobs of Money at Lithium”
- “The Revolution Will Be Battery Powered”
- “Lithium’s Price is Already Climbing”
- "The Spark That Ignites the Bonfire”
- “Why Gains Could Go Higher than 1,000%”
- “Time Is Of the Essence.”
If you own LEXG, I hope you did your due diligence or even better, I hope you were lucky and bought this stock when it was priced below $.10 per share, most likely before the first glossy brochure hit the mail. LEXG traded at $. 07 on March 18, 2011 and skyrocketed to a high $10.68 on April 28, 2011 before selling off to its current price of around $4.59. If you had invested $10,000 on the March 18th low and sold on the April 28th high, you didn’t turn just $10,000 into $100,000, you turned it into $1,525,714.20 in a little over one month!
However, if you did just some basic due diligence you’d probably never touch this stock. Here is what I have found out about LEXG with a few key strokes and it’s all publically available:
- Prior to November 30, 2010, Lithium Exploration Group, Inc. and ticker LEXG did not even exist. This is the day the company’s name and ticker symbols changed from Mariposa Resources, Ltd.
- In its 10-Q issued on February 22, 2011, Lithium Exploration Group shows NO ASSETS on its balance sheet….no cash, no furniture and fixtures, no property. That’s right, a company that “will turn the energy world on its head” had no assets as of December 31, 2010 and has less cash then spare change that has already fallen between the car seats in my new 2011 MDX.
- In a Schedule 13D filing filed with the SEC May 4, 2011, LEGX disclosed that a Panama company named Gekko (as in Gordon?, you can’t make this stuff up) Industries Inc. had acquired 5,000,000 shares, of a total of 47,875,000 shares outstanding, of LEXG for a grand total of $5,000, or 1/10 of a penny per share from the company’s former officer and director. At the April 28th high, that $5,000 investment was worth $53,400,000! (Gordon Gekko grins).
- The fine print on the glossy brochure, that I had to really strain to read, reveals that Gekko Industries paid for this “advertising” featuring Lithium Exploration Corp to promote public awareness of LEXG. It also states that the publisher of this brochure has received and managed a total production budget of $3,296,800 for this advertising effort and paid an editorial fee of $50,000 to Stock Market Authority.
One thing that LEXG seems to be very proficient at is issuing press releases, as it seems to issue a press release every day or so boasting about all the deals it is making to become a major Lithium producer. How it does this without a checking account remains a mystery (OK, I guess it is conceivable that they opened up a checking account after 12/31/2010).
At its current market price of $4.59 LEXG has a market cap of $219.8 million, down from its peak market cap of more than a half a billion dollars. So next time that mailman leaves the keys to your fortune in the mailbox, you had better spend some time to make sure the key fits or, better yet, make sure that timing is your strong suit. By the way, the online version of the mailer is online, same hype but not as colorful as the actual mailer.
These are the personal views of Wall Street Titan. All investors are encouraged to do their own due diligence.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.