Another day, another selloff in a cryptocurrency related stock. This time, SOS Limited Stock is taking a beating. Although Bitcoin is not down that much, and has been making an attempt to stabilize, many of the crypto related stocks are continuing lower, with many down over 50% from their 2021 highs. Marathon Patent Group and RIOT Blockchain, among others have not been hit as hard. So what was the cause of this dip? Let’s check out the latest news to find out why SOS Limited Stock is Plummeting Today.
SOS Limited Stock
First of all, what is SOS Limited?
According to the company profile:
SOS is a high-tech company with AI block chain as the core technology, headquartered in Qingdao. The company provides customers with rescue, big data, trade, digital asset management and other information technology services through AI block technology + satellite communication. It is currently listed on the New York Stock Exchange, the main board of the United States, with stock code: SOS.
Company headquarters is located in Qingdao, focus on big data accumulation, cloud computing. The SOS cloud emergency rescue service SaaS platform dominated by three products: basic cloud (medical rescue card, automobile rescue card, financial rescue card, rescue mutual aid card), cooperative cloud (information rescue center, intelligent big data, intelligent software and hardware), and information cloud (news today, e-commerce today). It provides information security services and marketing-related data, technology and solutions for emergency rescue services such as insurance, finance, medical care, health, automobile, safety and mutual aid, and builds an international efficient rescue service system by driving big data with technology.
Essentially, the company is a Chinese listed technology company focusing on cloud and data technology services. Up until recently, this was a major mover in the crypto space.
At the depth of the 2020 bear market, the stock bottomed out at around $1. Since then, it has been on a parabolic ride, along with other crypto related stocks, reaching a 2021 high of $15.88.
Unfortunately, like the other Chinese and US listed crypto companies, it has taken a beating since Bitcoin started to show weakness last week.
Why the Dump Today?
SOS Limited stock is trading around $4.50 at the time of this writing, down 26% on the day. Now down about 70% from its 2021 high.
What caused this?
We are seeing a few issues affecting the company today.
First, from a Motley Fool article on the subject:
Shares of SOS Limited (NYSE:SOS) tanked today, down by 12% as of 11:30 a.m. EST, after the company announced the exercise of warrants. The corporate action will be dilutive to existing investors but allow SOS to raise more capital.
Certain investors have agreed to exercise warrants to purchase up to 23.9 million American depository shares (ADSes) at an exercise price of $4.05. The gross proceeds from the exercise are expected to be approximately $96.7 million, and SOS has agreed to give the exercising warrant holders new unregistered warrants to purchase ADSes at an exercise price of $7 per ADS. Those new warrants will be good for five years before expiration and represent an additional 23.9 million ADSes.
Generally, stocks take a beating on any type of additional share offerings or warrant exercises like this one. Especially if it significantly increases the float.
We saw the same move by Marathon Patent Group (MARA) recently as well. MARA took a nice tumble, but recovered and made new all time highs a month later.
However, the move is also similar to MARA’s because the company intends to use the funds to invest into additional cryptocurrency mining equipment.
We will take them at their word on this one, considering they recently released news of a deal with Leibodong Hydropower Station in Hejiang to secure cheap hydroelectric power for its crypto mining operation.
Hindenburg Short Report
While the warrant exercise is bad enough, the real news is the Hindenburg short report. Hindenburg has quite the irritating method of shorting companies, although very effective.
See tweet below:
We are short $SOS, which we believe to be an obvious China-based shell game reanimating the corpse of a former China based company that earlier imploded 90% from its highs.— Hindenburg Research (@HindenburgRes) February 26, 2021
We think SOS is a $0 and has significant regulatory risk. pic.twitter.com/BKyCHINHIE
Essentially, Hindenburg is alleging that the company is a scam (shocking), and that there are significant risks associated with the business.
We have no confirmation of this, so we can not speculate as to the veracity of this report.
However, Hindenburg does not have the best track record of shorting certain stocks that end up not being a scam. We will see how this plays out.
SOS Limited Stock Prediction
The truth is stocks and cryptocurrencies have been getting hammered lately, particularly due to rising bond yields and now a surging USD. Check out our post on Nvidia to understand what this means.
As of now, we do not know whether this is just a garden variety dip or the final selloff that leads to a bear market.
while cryptocurrencies and the crypto stocks are getting hammered, it has become very clear that wide scale adoption is approaching. Although many cryptocurrencies like Bitcoin have skyrocketed infinity percent, there is a very likely possibility that we are in the early stages of the crypto bull market.
One could even make the claim that cryptocurrencies are the next evolution of the internet, which would undoubtedly make all current prices “cheap.”
In our opinion, not all cryptocurrencies and their related stocks will survive, but the best ones will most likely go parabolic…for a long time.
Our prediction is that this allegation by Hindenburg and the recent warrant exercise may turn out to be a nothing burger. As a result, we bought some shares around $4.30 this morning. Even just for a day trade, stocks that get hit 25% in one day (and down 75% from their recent highs) tend to retrace at least 50%.
We will see how this turns out!
What do you think?
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