LongFin (NASDAQ:LFIN) stock has skyrocketed in the past few days, going from $5 a share last Thursday to almost $150 during Monday (Dec 18) trading – a huge jump for such a little company. The company started trading on NASDAQ just last week and saw a gain of 229% (even after shares dropped back down). What happened to cause this massive increase? And why isn’t the jump necessarily a good thing for the company’s investors?
LongFin, a fintech company using artificial intelligence and machine learning technology in order to give importers and exporters foreign exchange and finance solutions, is another company that appears to be benefiting from their involvement with blockchain, a pattern which has seen many companies’ stock increase due to this involvement.
On Friday, LongFin announced that it now owns Ziddu .com, which is heavily involved in the blockchain sector and even has its own form of cryptocurrency, Ziddu coins. The price of Ziddu coins is tied to that of both Bitcoin and Ethereum – any increase in these cryptocurrencies will cause an increase in Ziddu coins.
By acquiring Ziddu .com, LongFin becomes involved in blockchain technology, which is “emerging as a technological revolution that is set to disrupt the financial services infrastructure,” according to Venkat Meenavalli, the CEO of LongFin.
Other companies that have invested in blockchain technologies such as Riot Blockchain (NASDAQ:RIOT) and Hive Blockchain Technologies (TSXV:HIVE) have seen their shares rise between 5 and 10-fold in the past few months, so why is LongFin’s massive leap actually an issue?
LongFin’s rapid stock increase can likely be attributed to the acquisition of Ziddu .com. The stock peaked at $142.82 today but is now resting around $72. The company’s market value rose from $265 million last week to $4 Billion today. This rapid increase, while seeming like amazing news for everyone, has caused the stock to take on an extremely high level of volatility, which is leading some people to be skeptical of LongFin’s standing. A high volatility means that the stock could move drastically, and suddenly, in either direction and no one, investors especially, will want to be around when that stock drops.
Meenavalli is included among the cautious, claiming that due to the stock’s low float, its massive increase could be because of a short squeeze. Meenavalli said that “[w]e don’t deserve this market cap”, and that the current market cap on the company is “insane.” Meenavalli is considering locking up his own shares in the company.
Block & Leviton LLP is also among the skeptics of LongFin’s price gain. The securities litigation firm has opened an investigation into the volatility of LongFin’s stock so that the firm can best protect the investors it represents from any extreme or sudden drop that LongFin may soon witness.
LongFin stock will be one to watch, but interested parties are encouraged to do thorough research before making any sort of commitment. Watch this space for follow up information!
Featured Image: depositPhotos/ tang90246
