Revisiting – What Would You Pay For This Stock?

On December 28th we posted a brief note discussing UBI Blockchain Internet Ltd, a Hong Kong based company.  Here is that note –

For the year, UBI had an operating loss of $1.83 million on zero revenues. It had $15,406 in cash, and: “In order to keep the company operational and fully reporting, management anticipates a burn rate of approximately $220,000 per month, pre and post-offering.”

Well, it seems like many investors were willing to pay a lot.  You see, UBI Blockchain Internet, a Hong Kong outfit whose shares trade in the US [UBIA] saw it’s stock price during the six trading days starting on December 11, 2017, soar over 1,100%, from $7.20 to $87 on December 18, as the word “blockchain” is in its name.  By December 21, shares had plunged 67% to $29. They closed on Wednesday at $38.50.

The above information was found in an article by Wolf Richter, who points out that UBI isn’t the only “scam” in town.  There has obviously been tremendous interest in all things crypto and blockchain in 2017, but how different is it from the hundreds, perhaps thousands, of dot-com companies that briefly appeared in the late ’90s with absurd stock market returns only to meet catastrophic destruction like supernovas?

We would suggest that you proceed with caution, but if you feel that you must gamble, please choose a “game” with better odds.

I hadn’t been following this stock since the note, but thought to check this morning.  Not to my surprise, the stock is currently trading at $4.00 per share having traded recently (3/23) at $3.00.  I’m sure that there are many such examples where investors have jumped on crypto and blockchain concept trades only to be burned bigtime. As we said above, “investors” should have learned from their experiences around the Dot-com era. Fundamentals do eventually matter!

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