TORONTO – The electric-vehicle revolution is propelling impressive gains in commodity and equity prices around the world, few more dizzying than Liberty One Lithium.
The penny stock, which has changed its name twice since 2016 and is years away from an operating mine, surged 250% in October, when both the price of lithium and a benchmark of producers posted single-digit returns.
Along with receiving permits to drill in Argentina and rising commodity prices, Liberty One has been boosted by Pyronix Media, one of a number of companies paid in cash and stock to sing the praises of clients through email, websites and social media. Such online promotions have led at least one US exchange to change its disclosure rules.
“There’s a lot of hype and expectation that probably will never be realised, and it’s very hard for small investors to sort those out,” Joe Lowry, a lithium industry consultant and former FMC Corp executive, said by telephone, without referring to specific companies. “Drilling a few holes doesn’t constitute an ore body. But that doesn’t stop them pumping the stock.”
Canadian and US securities rules prohibit issuers from making misleading or untrue statements. As long as they’re true and properly disclosed, paid promotions are fine.
One piece published on Stock.Report raised concerns at OTC Markets Group, the US over-the-counter exchange on which Liberty One trades. Entitled “Liberty One Lithium Delivers For Members!” it was published online in October and referenced steep gains by three other lithium companies, predicting: “Liberty One Lithium could be ready to join those ranks especially after what we’ve seen so far!” The article, which includes a pay-to-publish disclaimer in small print, has since been deleted from the Stock.Report website along with another titled “Huge Opportunity Ahead With Liberty One Lithium.”
The company was among several that OTC Markets had asked to issue statements to address the promotions. “The lessons learned led to us recently updating our recommendations around promotional disclosure,” OTC Markets CEO Cromwell Coulson said in a December 12 emailed response to questions.
The exchange declined to provide details of OTC Markets’ concerns regarding the Liberty One articles, and Coulson did not accuse the company of wrongdoing in interviews and an email exchange.
Liberty One, which didn’t respond to repeated requests for comment, has attributed most of its October share surge to other factors, such as obtaining drilling permits and the broader lithium rally. It acknowledged in a press release, issued in response to OTC Markets’ concerns, that online promotions also may have helped. The company said it first hired Pyronix Media for an undisclosed sum a year earlier, but that it had no involvement in the editorial content of the articles published by Stock.Report.
Liberty One’s address in Vancouver corresponds with an office labelled Venture First Capital Partners. On two visits, a receptionist there said that while Liberty One is located at the premises, no one was available to speak to a reporter. Messages were not returned.
In the same October 30 statement, in which it disclosed the work done by Pyronix, Liberty One said two of its directors exercised options to buy 500 000 shares in the past 90 days and then sold 489 900 of those shares.
One of those directors, CFO Morgan Tincher, exercised 350 000 options on October 24 and disposed of 380 000 shares on October 24 and 25, filings show. The latter date marked the shares peak, handing Tincher proceeds of more than $400 000 net of the cost of exercising the options. A similar amount was pocketed by another director, Patrick Whibley, on trades between October 20 and October 26, filings show. The article that concerned OTC Markets was emailed to investors on October 23, but also appeared on the website with an October 13 date stamp.
Filings on Canada’s System for Electronic Disclose show Tincher received 500 000 options on April 27, but didn’t disclose he’d received them until October 27. Neither Tincher nor Whibley responded to requests for comment made through the company.
In 2016, Pyronix Media acquired a stake in a Liberty One subsidiary that has since been spun off. A filing with the British Columbia Securities Commission lists Archie Roa as the contact person for Pyronix Media, with an address in Bacolod City, Philippines.
The listed address for the company is a cream-coloured bungalow in a gated community beside an empty lot of wild grass and banana trees. Staff at the address said the house belongs to Roa’s sister, who did not answer calls. Bacolod city officials in charge of business permits did not respond to a request for comment.
Stock.Report couldn’t be reached for comment. The site is owned by MAD Media Publishing, a company listed in a Nevada database as being registered in February 2017. According to its own online disclaimer, Stock.Report was paid $250 000 by Pyronix between April and August to provide coverage of Liberty One.
Stock.Report describes itself as a paid advertiser that publishes favourable information about publicly traded companies. “Investors should consider the information to be one sided and not balanced, complete, accurate, truthful or reliable,” it says in the disclaimer. “If an investor relies on the information in making an investment decision it is highly probable that the investor will lose most, if not, all of his or her investment.”
Since it responded to OTC Markets’ inquiry, Liberty One’s stock has fallen about 50%. It has still more than doubled in the past year, or about ten times the gain of the S&P/TSX Venture Composite Index. Other lithium juniors have also surged in the past year.
OTC Markets Group is lobbying for tougher US rules to ensure the people behind stock promotions are visible to regulators and investors.
The US Securities and Exchange Commission declined to comment on Liberty One. A spokesperson for the Ontario Securities Commission referred questions to the British Columbia Securities Commission, which declined to comment, as did TMX Group, which operates the TSX Venture Exchange.
Pyronix promotes other companies in Canada and the US. In 2015, it bought stock in Breathtec BioMedical months before the two companies signed a marketing arrangement, filings show. In the same year, Breathtec completed a plan of arrangement with Liberty One, when the latter was an oil junior known as Petro Basin Energy.
A spokesperson for Breathtec, Alfred Wong, confirmed that Pyronix purchased a million units of the company in 2015. Wong said he was unaware of the promotional agreement as he recently joined the company.