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Newegg Stock Has Far Too Many Red Flags to Recommend to Anyone

NEGG stock - Newegg Stock Has Far Too Many Red Flags to Recommend to Anyone

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Newegg Commerce (NASDAQ:NEGG) is a leading online retailer of technology products. As of April 2021, the company generated 32.6 million monthly visits on its website. For the year 2020, Newegg reported that it had 4.7 million different buyers of products use its marketplace, making it one of the top-trafficked sites in its category.

Newegg hasn’t exactly taken the e-commerce world by storm in recent years, but it has a respectable standing in its niche. And as of last year, Newegg is once again a publicly-traded company and trades as NEGG stock.

While Newegg is viewed as an American brand, it was acquired by a Chinese firm in 2016. Newegg came public in the U.S. via a SPAC last year, but remains closely tied to China. Also, unlike most firms on the Nasdaq, it hasn’t filed quarterly reports, instead just giving investors an annual 20-F filing.

Prior to its annual report released last week, the company’s last SEC filing was back in February, when it announced that its Chief Legal Officer had resigned. That’s not the best sort of news you could get from a company that so infrequently publishes new information to its shareholders.

While Newegg isn’t publishing much in the way of press releases, it is selling more stock. In December, the company filed a prospectus to sell up to $300 million of NEGG stock to the public. This seems somewhat unusual. Newegg is already a large mature commerce platform and generally wouldn’t be expected to need large infusions of new capital at this stage of its developments. The company also turned a small profit last year, which means it shouldn’t need capital to fund ongoing operations.

For potential investors, there was also a red flag in the prospectus. The company warned that it had: “a material weakness in our internal control over financial reporting which led to a restatement of consolidated financial statements as of and for the six-month period ended June 30, 2021.” The company pointed to a lack of “proper business processes, systems, personnel, and related internal controls in place” as leading to the error.

All this to say that NEGG stock is a highly speculative one. It briefly got caught up in the meme stock mania last year. However, there’s little indication that Newegg has much going on in terms of its fundamentals. That, plus the lack of much news to attract traders should keep this one off most people’s radars for the time being.

On the date of publication, Ian Bezek 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.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.


Article printed from InvestorPlace Media, https://investorplace.com/2022/05/negg-stock-has-far-too-many-red-flags-to-recommend-to-anyone/.

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