Cryptocurrency miners have increasingly come into focus of late. Miners such as SOS Limited (NYSE:SOS) with extensive Bitcoin (CCC:BTC-USD) mining operations are becoming ever-more lucrative as Bitcoin prices remain elevated. That said, SOS stock has languished somewhat in recent weeks, to a greater degree than Bitcoin prices.
Investors in SOS stock have seen shares spike repeatedly in double-digit moves to the upside and downside in recent months.
As a favorite of the social media-savvy retail mob, SOS has some cachet as a meme stock. Accordingly, there’s still a pervasive view among many diamond-handed holders that this stock will go to the moon.
However, of late, not all has been well SOS. The company’s been embroiled in a battle with short-sellers and has lost more than 70% of its value from its peak earlier this year.
Let’s take a look at what makes SOS a “make it or break it” stock for investors these days.
Cryptocurrency Mining All the Rage These Days
It really wasn’t that long ago that SOS decided to make the shift to Bitcoin mining. In fact, the company announced this strategic shift on Jan. 13.
Now, Chinese companies move fast, and investors may have anticipated that SOS would move quickly with this strategic transition. However, the light-speed rate at which SOS has announced mining rig purchases has absolutely stunned many investors.
SOS is ordering mining rigs in 5,000 unit chunks. Additionally, it seems like every few weeks another order is announced. The latest announcement from April 20 highlights the purchase of an additional 575 ETH mining rigs.
According to the company, these machines are already generating Bitcoin at an improved hash rate. If the numbers are to be believed, SOS could be one of the biggest crypto mining plays in the world, should its growth trajectory keep up.
For crytpo bulls, that’s a great thing. After all, SOS has reportedly entered into a contract with a local Chinese hydropower resource. This contract is anticipated to result in very low operating costs, improving the company’s margins (which don’t need much help, given where Bitcoin and Ethereum prices are today).
Recently, Hindenburg Research has cast some doubt on the accuracy of what’s been reported by SOS. The short-seller has been engaged in a back-and-forth with SOS investors and management over the accuracy of certain claims.
Investors have seemingly factored this risk in today, and SOS stock’s steep decline is evidence these claims seem to be taking hold today.
Short Squeeze Efforts and SOS Stock
That said, SOS investors have launched a counter-attack of late.
Reddit-inspired investors have recently attempted to squeeze Hindenburg and other shorts who are publicly attacking SOS. On April 7, a group of Redditors orchestrated an effort to bid up SOS stock over a five-day period. This attempt was successful, at least in the near term, with a 30% rise noted on April 7.
Now, I’m not sure that these Reddit-inspired retail investors can claim the higher moral ground over short-sellers with these types of actions.
Those complaining about market manipulation from short-sellers don’t earn many brownie points with me by blatantly attempting to manipulate a stock price higher.
Short-sellers serve an essential purpose in the financial ecosystem. These bears provide the balance the market requires to establish accurate price discovery. Therefore, attempting to “cancel” short-sellers isn’t going to somehow create a kumbaya type of serenity in the stock market. If anything, these sorts of actions create chaos.
But that’s neither here nor there.
The reality is SOS is a stock in the sights of the retail mob right now. Accordingly, this is a stock that’s likely to experience extreme volatility as battles are waged between speculators and short-sellers.
Conclusion
SOS stock is precisely the type of investment I try to avoid. Indeed, any stock that can jump 30% on a given day, and then decline by the same amount on another day, is one I don’t want to be in.
That said, there’s a place in the market for speculators too. I’m not sure who will win the Reddit-short seller battle. However, I’m not going to stick around to find out.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
