Last Friday, short-seller Hindenburg Research hit another target, SOS (NYSE:SOS). Shares of SOS stock plunged Friday more than 20% on concerns about regulatory risk, and the overheated nature of blockchain stocks.
In recent days, however, this stock has soared. Today, shares are up nearly 30% at the time of writing.
Let’s dive more into what the Hindenburg report alleges, and what others think of this stock right now.
Serious Allegations Prompted Initial Skepticism
Any stock with a year-to-date return of more than 600% (and we’re only in March) could certainly be a short-selling target. The hyped-up nature of blockchain right now, and soaring cryptocurrency prices, have provided jet fuel to these niche investments.
Given the lack of visibility into Chinese companies in general, Hindenburg’s investigation into SOS stock was also an interesting one from a regulatory perspective. The company accused SOS of misleading investors with false announcements, and highlighted discrepancies related to the company’s operations. The address Hindenburg visited was found to be a hotel, rather than what was disclosed in the company’s filings.
These concerns were enough to move the stock on Friday. However, SOS stock has since doubled from those lows.
SOS Stock Recovering on Broad Investor Support
Apparently, the market does not believe the short thesis proposed by Hindenburg. Furthermore, various contra reports have been released calling the Hindenburg report a “malicious short” and a short-term money-making tactic for Hindenburg.
Scorpio VC released this interesting contra report via Twitter, defending SOS and its operations. This report, combined with the fact Bitcoin (CCC:BTC) is trading above $50,000, has taken blockchain firm SOS dramatically higher. As I write, this stock continues to climb toward a 35% intraday increase.
SOS is popping on heavy volume, so caution should be taken with such stocks right now with such polarized views. SOS stock certainly remains a highly volatile play, so investors should remember to maintain proper portfolio sizing discipline, should they be enticed to jump in right now.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.