After soaring more than 86 times, it plummeted by 98%. Why is the extreme market of Chinese concept stocks frequent?
After soaring more than 86 times, it plunged 98%
On August 31, local time, Yingxi Group transferred from the OTC of the pink sheet market to the Nasdaq capital market. On the same day, the share price of Yingxi Group opened at $27, which was 5.4 times the issue price of the stock at $5. The increase narrowed in early trading, and the stock price fell back to $12.95. It rose sharply since midday, and finally closed at $656.54, which was higher than that in Nasdaq. The closing price of the OTC market on the day before the listing of Starq was 7.5 US dollars, a surge of 8653.87%.
It is reported that Yingxi Group issued a total of 5 million ordinary shares this time. The offering raised approximately $25 million, before underwriting discounts and related expenses.
However, the good times did not last long. In the next two trading days, Yingxi Group fell back rapidly. On the second day of listing, it fell 95.43%; on the third day, it fell 68.03%. As of the close on September 2, the stock reported 9.59 US dollars per share. The two-day cumulative decline reached 98.54%, reversing most of the gains in the first trading day. And on September 2, the trading volume of the stock increased significantly, with 5.113 million shares traded throughout the day; while on August 31 and September 1, 516,100 shares and 992,400 shares were traded, respectively.
According to public information, Yingxi Group, headquartered in Shenzhen, is a comprehensive service provider focusing on clothing manufacturing, logistics services, property management and sublease, and epidemic prevention supplies. It has 6 subsidiaries. In 2016, Yingxi Group successfully landed in the US capital market through reverse mergers and acquisitions.
According to the financial report, the operating income of Yingxi Group in fiscal year 2021 (as of March 31, 2022) was US$12.6906 million, a sharp drop of 48.7% from US$24.7348 million in the previous fiscal year.
Specifically, the company’s clothing manufacturing business revenue in fiscal year 2021 was US$2.5254 million, accounting for about 19.9% of the total revenue; the logistics service business revenue was about US$5.3323 million, accounting for about 42.0% of the total revenue; property management and The sublease business income was US$4.2652 million, accounting for about 33.6% of the total income; the epidemic prevention supplies business income was US$567,800, accounting for about 4.5% of the total income.
The extreme market situation of Chinese stocks is frequent
It is worth noting that since July, many Chinese concept stocks have performed extreme market conditions.
AMTD Digital, which landed on the New York Stock Exchange on July 15 this year, reached a peak of US$2,555.3 per share in just 13 trading days, an increase of more than 300 times, and its total market value once soared to US$310 billion, surpassing Alibaba,JD.com, Pinduoduo and many other leading Chinese stocks. Since then, AMTD Digital has been going down all the way. As of the close on September 2, AMTD Digital closed at US$100.01 per share, and its market value fell to US$18.746 billion.
Zhifu Capital, which was listed on Nasdaq on August 5th, had its stock price as high as $235.95 per share on the first day of listing, a surge of more than 52 times. The circuit breaker was triggered many times during the session. As of the close of the day, it closed at $97 per share. , up 2325%. However, in just 3 trading days, Zhifu Capital fell 89.47%, and the turnover rate climbed to 57.36%. As of the close on September 2, the stock price has fallen to $5.82 per share.
There are also insights that stage the “roller coaster” marketeducate。
On August 26, Jianzhi Education went public on Nasdaq. After the opening bell, the stock price skyrocketed. It soared more than 36 times during the session and closed up 275% on the same day. However, the stock price fell sharply for three consecutive days. As of the close on September 2, the stock price had fallen to $5.32 per share.
Why do Chinese concept stocks frequently rise and fall?
Without the support of fundamentals, China concept stocks have frequently experienced skyrocketing and plummeting in the early stage of listing. What is the reason behind it?
Some analysts believe that the high concentration of share capital and the scarcity of liquid stocks are the reasons for the soaring share prices of some Chinese concept stocks. For example, AMTD Digital has a total share capital of approximately 187 million shares, while only 18.4 million shares are outstanding; similarly, the total share capital of Zhizhi Education is approximately 60.56 million shares, while the outstanding shares are only 5 million.
Some market participants pointed out that the soaring rise of such stocks is inseparable from capital speculation. When the fundamentals and valuations do not match, investors should be vigilant.
The investment and research team of Futu Securities reminded that there is no historical bargaining chip for new overseas IPOs, and the process of attention from low to high is likely to cause a concentrated catalyst of market sentiment. At present, there is no hot spot for making money in the market, and short-term speculation funds are concentrated in speculation. Investors should give priority to risk factors.