2024-03-07 03:25:07 ET
Prestige Wealth (NASDAQ: PWM) stock price jumped sharply on Wednesday as it went through a strong short squeeze. It jumped by more than 43% in the regular session and over 24% in the extended hours. This surge brought the company’s market cap to over $15 million.
I wrote about Prestige Wealth in July 2023 as its stock was surging. At the time, I compared the company with other Chinese companies like AMTD Idea and Top Financial, which had become beloved among day traders. I recommended that investors should avoid the company since AMTD and Top stocks had also collapsed.
Prestige Wealth stock chart
That forecast was accurate as the Prestige Wealth stock price has collapsed by more than 94% since then.
Recently, however, PWM stock has surged in a high-volume environment. Its total volume on Wednesday stood at over 1.8 million, which was much higher than its recent average. For example, the volume stood at 164k on Tuesday and 34,200 a day earlier. The daily average volume has been 104k.
There was no catalyst for the stock since the company published its most recent results in December. These results showed that the company’s net revenue in the first half of the year stood at $565k, down from $1.78 million a year earlier. Its net income crashed to 238k as the company faced major headwinds.
Therefore, the most likely reason why the Prestige Wealth stock price surged is that it has become a favourite one among meme investors and day traders. As a penny stock, it is becoming relatively easy to pump the company. This explains why the company has been trending in key social media platforms.
This performance is not new. Recently, we have seen traders pump popular stocks like Bit Brother and J-Long Holdings. They are also pumping cryptocurrencies, with all meme coins now being valued at over $28 billion.
Some small Chinese stocks have also become popular among meme traders. Recently, Top Financial stock surged for no reason. The same is true among other companies like J-Long and BETS, which tend to pump and dump regularly.
Therefore, it is highly risky to buy and hold Prestige Wealth because of its weak fundamentals. It is also risky to short it because it could become ripe for a short squeeze as happened this week.
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