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The stock of TOP Financial Group Ltd., a Hong Kong-based broker that went public last year, soared more than 890% Friday to a fresh record high with no apparent news to drive the move.
Volume of 5.5 million shares traded by early afternoon far exceeded the average daily volume of 872,000 over the last 65 days. The stock
TOP
was halted for volatility multiple times during the session.
The move eventually prompted the company to make this statement:
“While it is the company’s practice not to comment on any stock movement, we believe it is important to note that we caution investors and all other persons to rely solely on statements and filings with the United States Securities and Exchange Commission issued by the company itself or its authorized representatives.
“The company does not intend to make further statements regarding this matter,” it added.
TOP is popular with the Reddit group WallStreetBets, where a user with the handle Major-Access2321 was encouraging others early Friday to look at after-market trades from late Thursday.
The chart showed a steep rise in the stock and the user was speculating that Friday would see a huge round of short covering, or the closing out of bearish bets.
The latest exchange data showed short interest, or shares sold short, made up about 12.4% of the public float, or shares available for the public to trade. Read more about how short selling works.
Meanwhile, a lot of the shorts had already been covered this year, as short interest had declined to roughly half what it was at its peak in January.
The stock is 92.7% owned by insiders, according to FactSet data. Millennium Management LLC is its biggest institutional shareholder with a 0.1% stake.
TOP went public at $5 a share on June 1, 2022, the low end of the range of $5 to $6 it had told investors to expect. The stock immediately rallied about 400%.
It has been volatile since then and is showing gains of more than 3,000% for the year to date.
The company was originally called Zhong Yang Financial Group and raised $25 million in its initial public offering (IPO) at a valuation of $175 million.
It specializes in the trading of local and foreign equities, futures, options and other financial services, according to its IPO documents. It trades on Nasdaq under the ticker ‘TOP.’
In its annual report filed with the Securities and Exchange Commission in August of 2022, it disclosed net income of $3.5 million for the year ended March 31, 2022, down from $5.0 million the year before. Revenue came to $7.8 million, down from $16.9 million.
“We plan to keep our business growing by expanding our customer base to include retail investors of a wider range of wealth within the Asian communities across the globe, by increasing the products we offer to include securities and futures from a larger number of stock exchanges, and by starting to offer services such as asset management, and CFD products and services,” the company said in the filing.
CFD, or contract for difference products, are derivatives that are tied to an agreement between a buyer and seller to exchange the price difference on an asset between the dates that the contract is open and closed. The buyer makes a profit if the price is higher when the contract closes.
The contracts are not allowed in the U.S. as they trade over the counter, while U.S. rules require that derivatives pass through regulated exchanges.
See now: What is a credit-default swap? Debt-ceiling jitters put obscure instrument back in spotlight.
Its most recent earnings report on its website says it had net profit of just $2.5 million in the six months through Sept. 30, up from $900,000 in the same period a year earlier. Revenue came to $5.2 million, up from $3.2 million the year earlier.
Meanwhile, other popular meme stocks were also higher Friday. Videogame retailer GameStop Corp.
GME
was up 3.7%, AMC Entertainment Holdings Inc.
AMC
was up 2.5% and the AMC preferred stock
APE
was up 2%.
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