Why CBAK Energy Technology’s stock climbed nearly 84% on Monday
Even on a day like Monday where great news Moderna (NASDAQ: mRNA) – the interim results of a phase 3 study of its candidate vaccine against the coronavirus show that it is 94.5% effective – turned green most of the stock market averages, the performance of CBAK Energy (NASDAQ: CBAT) the stock was a bit breathtaking.
In a morning trading frenzy, shares of the Chinese lithium battery maker climbed more than 72%, before retreating somewhat, then climbing again in the final half hour to end the day up 83%. , 7%.
And as far as I know, CBAK stocks made this climb without any news.
No gains. No analyst upgrade. No increase in price targets. No news that had a direct link to CBAK which could be credited with starting a fire under the stock price on Monday. So what made?
A short press is a theory. According to the Nasdaq, there were just under 373,000 CBAK shares sold short at the last report. This is only about 0.5% or 0.6% of all shares outstanding, so the short-term interest in the share is not incredibly high. Yet investors who have CBAK stocks sold short could be penalized following the stock’s previous gains in November – it is up 228% since the start of the month. If scared of the inability of the stock to react to the laws of gravity, the “shorts” could have closed their positions, causing the stock to rise higher as they bought the stock to do so. .
Another catalyst potentially in favor of CBAK – On Friday, JP Morgan posted a positive note on the health of China’s “new energy vehicle” sector, predicting that sales of electric cars, plug-in hybrids and battery-powered vehicles. fuel will increase 43% per year over the next five years. If you assume that all of these cars will need batteries (which most will), and that Chinese car manufacturers might be inclined to buy their batteries from a Chinese battery maker like CBAK, then this explosive growth rate in electric car sales could logically also spark excitement in the electric car battery stock.
Regardless, the fact remains that the market cap of the CBAK stock just increased by over $ 200 million in a single day. Considering this is a company that has barely grossed $ 24 million in returned over the past year – and who has lost over $ 9 million in making those sales, with $ 16 million in negative Free cash flow – Monday’s skyrocketing smacks of irrational exuberance to me.
But again, I would have said the same about CBAK’s 55% rise on Friday and 14% rise on Thursday as well. It just goes to show why investors need to be very careful about short selling even the most obviously overvalued stocks. To quote a well-respected economist: “The stock market can stay irrational much longer than you can stay solvent.”
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.