SOS Tumbles 40% on $4 Million Registered Direct Offering

Now might be the time to buy a slice of the fast-growing newly transformed marketing analysis provider.
Anthony RussoDec 22,2020,17:31

The stock in SOS Ltd. (NYSE: SOS) tumbled 40% intraday Tuesday after pricing its $4.03 million registered directed offering through the issuance of its American depositary shares and warrants.

The Qingdao-based marketing analysis provider said in a statement today that it has agreed to sell 2.6 million shares. The warrants, exercisable immediately on issuance and expire in five years, carry an exercise price of $1.55.

The lone placement agent on the deal is Maxim Group LLC.

The offering is expected to close on or around Thursday.

SOS Posts Strong Preliminary Estimates for 2020

To add to the stock plunge today, SOS also hit a 29 week low of $1.26 per share. The news comes after SOS hit a high of $2.65 per share Monday on SOS posting preliminary estimates for the twelve months ending December in what the company referred to as “record-breaking results.”

In the full year 2020, SOS expects to see revenues of around $49.5 million, skyrocketing 451% from 2019. It anticipates gross margins to be roughly 9% in the full year, up nearly double from 5% in 2019.

SOS attributed the growth in the year to its transformation into the health and emergency services sector. Formally known as China Rapid Finance Ltd., the company has moved away from peer-to-peer lending with Beijing continuing its crackdown and forcing firms out of the space over the past few years. At the end of August, just 15 P2P firms remained in China, down significantly from 5,000 in 2017, according to the China Banking and Insurance Regulatory Commission.

As a result, SOS has transformed and now provides marketing-related data, technology, and solutions to emergency healthcare services in China. In July, the company completed an asset injection with Yao Bao Two Ltd. Then, in August, the company said its final goodbye to the remains of the legacy business of China Rapid.

SOS also provided guidance for the full year 2021, expecting net revenues to grow by roughly 286%.

Why you Should Buy SOS at the Dip

While the company appears to be growing fast in terms of revenue, its stock performance hasn’t reflected it yet, at least this year. With shares now down 65% year-to-date, now might be a perfect time to buy the stock.

Of course, investors should be wary of escalating Sino-U.S. trade tensions, as President Trump signed a bill into law late last week that aims to delist Chinese firms on U.S. exchanges that refuse to abide by auditing standards.

However, at around $1.30 per share, I would bite at the dip here to get a piece of SOS shares. Its current valuation could be a bargain for investors as we head into 2021.

Topics:SOS, China Rapid.