It’s not easy to win against one of your industry’s most prominent companies, but Koss Corporation (NASDAQ:KOSS) has done it. The electronics producer recently saw two of its patents for wireless ear and headphones challenged by Apple (NASDAQ:AAPL), but yesterday brought some good news. The Patent Trial and Appeal Board made the decision not to institute reviews. According to Bloomberg Law, the tech giant was unable to demonstrate at least a “reasonable likelihood” of winning its claims that the patents “didn’t cover new inventions.” This wasn’t the smaller company’s only cause for celebration, though, as yesterday saw KOSS stock shoot up.
KOSS Stock: What Happened
Digital investment communities began yesterday waiting for a pop from a different stock, AMC Entertainment (NYSE:AMC). The popular meme stock, though, spent yesterday declining and hasn’t done any better today.
While they were waiting, though, KOSS stock experienced a late rally and started rising. Between yesterday afternoon market open, the stock rose by just over 46%. While its fallen a bit since then, the stock is still up 5.5% for the day. This comes on the heels of a poor trading week for KOSS, which spent the past five days flatlining between $15-$16.
Despite the fact that shares did fall this morning, they are gradually moving upward again, likely because the social media momentum hasn’t died down. Both Twitter and Reddit users are discussing the stock, using this morning’s pullback as an opportunity to buy.
What It Means
What prompted this late rally and impressive gains? Well, the patent story breaking certainly helped, mostly because it caught the attention of large groups of Reddit and Twitter investors. The apes who’d been waiting for an AMC spike that never came were suddenly much more interested in buying KOSS on the dip before it rose again. As these communities love to do, they brought the hype and urged all their colleagues to go big on KOSS stock. The momentum spread and shares began to rise.
It’s always an interesting day when a lesser-known company generates the type of momentum that we saw from KOSS stock yesterday. The story of its victory against Apple, though, is the perfect catalyst for exactly such a scenario. Social media loves a David and Goliath story, and the investor crowd that powers meme stock frenzies loves to bet against the big guys.
Why It Matters
We all know that social media-driven stocks can experience incredible volatility.
That said, the momentum behind the KOSS stock spike is still going strong. Most of the Reddit chatter has come from a subreddit titled r/KOSSstock which includes more than 2,000 members who are still buzzing over the stock.
So what comes next? Koss’s gains may be be sustainable in the long term, but they likely are not, given typical trading patterns associated with Reddit stocks. As you may recall, Koss rose to fame in the earlier weeks of the GameStop (NYSE:GME) and AMC short squeezes. Since then shares have largely fallen out of the spotlight.
While the victory against Apple is good news for the company, it may not be enough to drive sustainable growth, at least not right now. If it leads to a new product down the road, that may be a different story. Keep a close eye on KOSS shares here.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.