Shares of Chinese cryptocurrency mining company SOS Limited (NYSE:SOS) are up a staggering 4,000% today, having risen to $7 from less than 17 cents yesterday.
While the sharp jump today is shocking, it is the result of SOS stock adjusting the trading ratio of its American depositary shares (ADS), a procedural step that has led to the seemingly big move higher. Before today, SOS stock had fallen 80% year-to-date.
In a statement, SOS Limited said that it has changed the ratio of its American depositary shares from one ADS representing 10 Class A ordinary shares to one ADS representing 500 Class A ordinary shares. This switch has resulted in the share price of SOS vaulting from just 17 cents to $7.
The company added that “no fractional new ADSs will be issued in connection with the change in the ADS ratio. Instead, fractional entitlements to new ADSs will be aggregated and sold by the depositary bank and the proceeds from the sale of fractional ADS entitlements … will be distributed to the applicable ADS holders by the depositary bank.”
Based in Qingdao, China, SOS Limited provides data mining and cryptocurrency analysis services to corporate clients, primarily within mainland China.
Why It Matters
It would be highly unusual for any stock to increase by 4,000% overnight. There exist few catalysts that would send a stock that high so quickly. The massive move higher in SOS stock is due to an accounting procedure and change in the structure of the shares. In reality, holders of SOS stock have not gained anything new.
SOS stock is getting noticed, not only for the big change in its share price today but also because it operates in the cryptocurrency sector, which is undergoing extreme volatility right now. Indeed, several firms in the space are filing for bankruptcy or halting customer withdrawals over liquidity concerns. Prices for digital coins and tokens continue to trend lower around the world.
SOS stock is undergoing a procedural change today that has artificially lifted its share price by some 4,000%. However, in actuality, the share price has not gained anything and is worth the same following the restructuring. Given that the share price is down 80% on the year, investors should proceed cautiously with this stock.
On the date of publication, Joel Baglole 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.