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China SXT Stock Continues Rising on Suspected Short-seller Activity; Up an Additional 14%

The company has made no announcement since its IPO, and the reason for the wild swings in price are unclear.

Anna Vodopyanova
    Jan 31, 2019 10:25 AM  PT
China SXT Stock Continues Rising on Suspected Short-seller Activity; Up an Additional 14%

The stock of China SXT Pharmaceuticals Inc. (Nasdaq: SXTC) was trading up an additional 14 percent midday Thursday following a day of volatility that saw it more than double its IPO price of $4 during the day.

Indeed, the entire month since its iniital public offering has been quite a ride.

The Chinese herbal medicine maker became publicly traded on Nasdaq early this month, raising $10.2 million by selling 2.5 million shares in its initial public offering. A week after its IPO, its stock peaked at $23.35 per share, then quickly dropped back down to trading near $7 and has been on a slide since, touching a low of $3.62.

At midday today, the company was trading at $6.90 per share.

The company has made no announcement since its IPO, and the reason for the wild swings in price are unclear. However, on Wednesday, several large blocks of shares changed hands, including one bid for nearly 60,000 shares, according to data from Thomson Reuters Eikon. After opening at $4.07 on Wednesday, its stock soared twice intraday, rising as high as $8.47 per share, before closing at $6.03 per ADS, up 44 percent on the day.

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(Source: Thomson Reuters Eikon)

The movement resulted from short-seller attempts at covering their positions, suspected market analyst Steve Kanaval, who wrote about the company on Equities.com.

"It looks like the short portfolio manager got hooked selling stock under $5.00 and is now trying to get them back," Kanaval wrote in his report. "This is no fun (and I have seen the boss run out of his/her office on previous occasions) when the upper limits of risk get blown out and bells start going off."

He concluded, "Welcome to the world of risk and trading, short sellers have unlimited upside loss potential."

Founded in 2005, China SXT is headed by Feng Zhou, who is among four shareholders holding a combined 51.5 percent of its shares.  The company, based in Taizhou, sells traditional medicine products primarily to hospitals and drug stores in nine Chinese provinces. 

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