Xunlei Limited Opens Up About LinkToken at CES 2018, Stock Plunges Nearly 30%

Xunlei Limited Opens Up About LinkToken

When Xunlei Limited (NASDAQ:XNET) was preparing for its appearance at this year’s Consumer Electronics Show (CES), which is held in Las Vegas, the China-based company probably didn’t expect the reaction that it got.

After discussing its latest product OneThing Cloud at the event, shares of the company started to plunge on the market, currently trading at $17.03, which puts the stock down $5.86, or 25.61%.

While some might not consider a more than 20% decline to be a considerable drop – it could be worse, right? – for Xunlei Limited standards, it is quite the beating considering the company’s stock has been red hot ever since it disclosed that it was going to roll out a new business plan that centers around blockchain.

What Happened Friday?

Put on by the Consumer Technology Association, the CES is a 4-day event in which leaders and innovators around the world come together to discuss the business of consumer technologies.

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Today is the last day of the event, and Xunlei Limited not only made an appearance, but it also showcased its product OneThing Cloud, which is a file sharing service that the company rolled out in August of last year. Essentially, the platform allows for data to be managed via blockchain technologies, and then anyone using the platform will be paid with cryptocurrencies for their involvement.

Even though the cloud computing behemoth has a relatively strong track-record, reportedly gaining 289.7% last year, it might need to work on how it articulates aspects of its business.

What Does That Mean?

While discussing OneThing Cloud, Xunlei Limited provided those who attended the event with a description of what the product does, which was needed, I’ll admit that, but then it slipped in statements like anyone who participates in the OneThing Cloud reward program can receive “LinkToken” as rewards.

This is the first of two reasons that could explain why the stock is plunging. First and foremost, Xunlei Limited has been very vocal about how it is developing blockchain digital money, similar to Bitcoin, but until now, investors didn’t have any more information than that. It was the first time investors had heard that Xunlei Limited’s own virtual money was to be called LinkToken, and it seems investors are disappointed with what the company came up with.

In the company’s defense, blockchain probably isn’t the easiest sector to move into – though everyone is doing it – however, the question that lingers in my mind is: was Xunlei ready, and prepared, to make this announcement? Did they think it through about how the Las Vegas crowd would react to the revealing of LinkToken? It’s not that the announcement was necessarily bad, it just didn’t seem to sit well with investors.

The second reason, in my opinion, as to why the stock is dropping on Friday’s trading session is because, during its appearance at the CES, Xunlei Limited mentioned that it is looking for cooperation partners for its “oversea efforts” with the virtual money LinkToken. Translation? The company doesn’t have any partners.

Further, it mentioned that it “plans” to enter the Hong Kong SAR Market as well as the Southeast Asia and India marketplace. Translation? Xunlei Limited isn’t even in these markets yet.

The Takeaway

Overall, I think Xunlei Limited should have perhaps waited a bit longer before it unveiled LinkToken. At the very least it should have waited for partners. In our world, we, especially investors, want some sort of guarantee, no one wants to put all of their eggs in a basket that isn’t 100% secure.

That being said, it could have just been a spur of bad luck, and next week the stock could jump after investors think a bit more about the concept of the rewards program and LinkToken.  

What do you think?

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