What happened?
Canada’s ride-hailing stock Facedrive (TSXV:FD) surprised markets with its huge 128% jump yesterday. The surge came after 10 consecutive days of a heavy selloff that collectively wiped off 83% of its market value. Speculators seem to be betting big on the volatility in this oversold name, which led to the recent surge.
Interestingly, more than 5.4 million Facedrive shares exchanged hands on September 16, almost 15 times higher than its three-month average daily trading volume.
So what?
However, this should not be perceived as the beginning of Facedrive’s sustainable recovery. The company has not communicated with its shareholders about the challenges that have surfaced in the last few weeks.
One of the former founders, Imran Khan, even said that Facedrive is considering filing for bankruptcy protection. In addition, the ride-hailing company diverted its attention into multiple ventures since last year, which indicates a lack of long-term vision and focus.
Facedrive continues to struggle on both operational and financial fronts, which raises questions on the steep stock surge early this year. Undoubtedly, selling in the stock accelerated after the top executive departed late last month.
Facedrive reached a market capitalization of close to $6 billion in February 2021, which marked a terrific 3,000% return since early 2020. However, consistent stake selling by key people has weighed on the stock. After peaking to $60 levels in February 2021, the stock dropped to $0.88 on September 15. That’s a massive 98.5% decline in market value in just seven months.
Now what?
Facedrive stock will likely continue to trade immensely volatile in the short term with a dominating downward trend. It’s a money-losing company with just $13 million in annual sales. Even if the stock shows some short-term gain potential, the fundamentals don’t support it and, it could be a highly risky bet. So, don’t try to catch a falling knife, as there are lots of worthy opportunities better than Facedrive.
