Shares of small and micro-cap Chinese companies listed on the U.S. exchanges zoomed last Friday
Shares of small and micro-cap Chinese companies listed on the U.S. exchanges zoomed last Friday i.e., April 28, driven by strong interest from retail investors ahead of May Day holiday. Such instances of price increase for small-cap stocks often turn out to be ‘meme rallies’, which reflects unusual share price gains driven by news from vested individuals on social media sites.
Top Financial Group Ltd, an online brokerage firm, continued with its pre-market momentum and surged by 441.05% to close at $108.21, a mammoth rise from its previous day close of $20. Another company, Magic Empire Global Ltd clocked an increase of 331.03% to close at $4 on April 28, from a level of $0.93 on April 27. Two recently listed firms on the Nasdaq – Top KingWin Ltd and U Power Ltd also saw their shares increase by 67.36% and 26.21% respectively, on Friday. Post the stellar rise on Friday, all these stocks have experienced significant correction. As of May 3, Top Financial was down 22% from its Friday’s close, Magic Empire down 43%, Top KingWin down 36% and U Power down 31%.
Founder of short selling firm Hindenburg Research, Nathan Anderson, termed these as ploys used by offshore scammers to execute their pump and dump schemes. He further said “Nasdaq should be halting these tickers, but the exchange instead seems content to collect listing fees through brazen fraud operating in broad daylight.” However, Nasdaq in the recent past has made its regulations strict, and in October did not allow the IPOs of at least four small Chinese companies to go through. It also highlighted concerns of potential threat of fraud of small-cap IPOs, which are manipulated by pump and dump schemes.
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