Lithium Corporation (OTCMKTS:LTUM) surged today on a powerful social media rumor. Yesterday, a press release posted on MarketWatch announced that the company had been acquired by Tesla (NASDAQ:TSLA). Momentum quickly spread afterwards. Of course, since then, sources have confirmed the news is false. However, that didn’t stop LTUM stock from climbing. Shares have fallen back this afternoon, but they are still in the green as of this writing.
The false press release did not immediately push LTUM stock up. This morning, shares remained stagnant, only beginning to surge close to noon. Then, at it’s highest point, Lithium Corporation spiked by nearly 280%. That said, shares soon began falling almost as quickly as they rose.
Currently, LTUM stock is up just 27% on the day at under 36 cents per share.
What’s Happening with LTUM Stock?
At first glance, the Lithium Corporation press release looks convincing. After all, MarketWatch is a trusted venue. Additionally, lithium is a key component for electric vehicle (EV) production and Elon Musk has made deals with miners before. So, a micro cap like LTUM is exactly the kind of company Tesla could easily acquire.
Driven by the false report, LTUM stock’s performance demonstrates the power of hype. As seen today, social media and jumped-to conclusions can send stocks skyrocketing to new heights.
After tweeting about the story, one popular market influencer removed their posts and issued the following statement:
Again, please beware that the $LTUM and $TSLA story is fake. The CEO of $LTUM confirmed it was a fake story, after stock spiked.
So, despite going across multiple news screeners, it is not a true story!
Apologies about tweeting about it; will do better in the future. https://t.co/YRUQmF6D6V pic.twitter.com/isQvB24NA5
— unusual_whales (@unusual_whales) April 13, 2022
5W Public Relations, the listed media contact on the release, has also since confirmed with InvestorPlace that the press release is false. 5W also maintains that it is in no way affiliated with the statement. Hours after its surge, Lithium Corporation issued a statement on the Tesla acquisition rumors, too:
“[C]ontrary to a press release issued by unknown parties on the 12th of April and rumors circulating on social media, we have not received so much as an expression of interest from Tesla […] We would be happy to chat with Elon if he was inclined, but presently there is no relationship between the two companies.”
Amid this confusion, TSLA stock is also trading well today. However, its progress can be primarily attributed to a recent endorsement from Ark Invest CEO Cathie Wood.
What It Means
Lithium Corporation’s sudden rise should remind investors to proceed carefully when penny stocks experience sudden surges. The false report looks credible at first glance, demonstrating how important it is for investors to conduct their own careful research.
A quick look at both companies’ press rooms would have shown no announcements of the deal. Plus, no major news outlets rushed to cover the deal after the false statement went live. That should have raised some red flags. By the time the Twitter (NYSE:TWTR) user listed above confirmed the rumor was actually false, LTUM stock was already falling.
Momentum from this rumor has kept LTUM stock fairly elevated today, but it is likely to continue falling as the truth circulates.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.