Stock in electric vehicle startup Lordstown Motors rose in late trading Wednesday, despite a new Sell rating from Wall Street and a “going concern” warning from the company itself. It’s a surprising turn of events that will leave fundamental investors scratching their heads–or blaming meme-traders.
From the top price on Tuesday, before recent trading craziness began, to the depths on Wednesday, Lordstown (ticker: RIDE) stock was down by roughly 44%, falling from almost $16 a share to below $9 a share.
What began to drive down shares Tuesday was a “going concern” warning from the company, included in its quarterly financial statements, filed with the Securities and Exchange Commission on Tuesday. Shares closed down about 16% Tuesday.
Shares were down roughly 20% Wednesday. The “going concern” warning weighed on shares for a second day, but a new Sell rating from RBC analyst Joe Spak didn’t help, either. He launched coverage of the company Tuesday evening, recommending his clients get out of the stock. HIs price target is $5 a share.
Despite the double whammy, the stock has completely turned around in late trading, rising about 31% from the Wednesday low point. Shares were up as much as about 4% for the day in late trading and ended up just in the green. The S&P 500 and Dow Jones Industrial Average, for comparison, finished down about 0.2% and 0.4%, respectively.
What’s going on is hard to figure. Lordstown had become a meme stock. Meme stocks are small capitalization stocks, usually with a high percentage of shares available trading sold short by bearish investors, that show up on social media with comment for retail traders to buy. Lordstown stock rose about 20% on June 2. Shares rose another 7% Monday and were up on Tuesday until the “going concern” warning popped up.
Meme-trading might be responsible for Wednesday’s late rally, but other meme-stocks aren’t having as good a day as Lordstown. AMC Entertainment (AMC) fell about 10%. Clover Health Investments (CLOV) shares dropped 24% Wednesday after almost doubling Tuesday.
So what is driving Lordstown stock today? It’s simply hard to figure a credible narrative.
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