This report will be analysing SOS Ltd’s stock (NYSE: SOS) for the week commencing 26th July 2021. This will be done using StockGeist, a platform that determines the sentiment towards a stock in real-time through market sentiment indicators, by applying natural language processing to the latest news updates and social media posts. All times given are in GMT+0.
SOS Ltd, formerly China Rapid Finance Ltd, is a holding company based out of China with a focus on emergency services. Through its subsidiaries, SOS Ltd utilises blockchain and satellite communication to provide cloud computing and marketing services to several members of the emergency rescue market, including insurance companies, medical institutions, financial institutions and more.
From the beginning of 2020, SOS Ltd saw a five-month-long bearish downtrend in their share price. This was likely caused by the company’s poor financial performance in the preceding year, with -$9.90 million in earnings (-85.12% change from 2018) and $37.66 million in revenue (-43.48% change from 2018), which were declared in December 2019. After a slightly bullish period that preceded this downtrend, the value of SOS Ltd’s stock remained relatively stagnant for the remainder of 2020.
However, from the beginning of 2021 to mid-February, a surge of approximately 720% ($1.44 to $11.84) in share price was observed, owing to a few key catalysts. The sharp rise in the value of Bitcoin around this period was one such catalyst, largely due to the fact that SOS Ltd had announced the purchase of a large batch of crypto mining rigs in January. This purchase proved to be incredibly profitable for the firm very quickly, which attracted a large number of new investors. The rise in the value of Bitcoin also brought more positive attention to the future of blockchain technology – a technology that is greatly utilised by SOS in the provision of their services.
This spike in value, however, was quickly followed by a sharp downturn. One possible cause of this immediate reversal was SOS Ltd’s announcement in early February that it had entered into a securities purchase agreement with certain accredited investors to purchase $86 million worth of warrants that could be exercised for $7.00 to acquire American depositary shares of the company. As the share value reached new highs for over a year, speculators and retail investors instigated a selloff, which enticed other investors to exercise their warrants and sell their shares to ensure a profit on their part. This negative feedback cycle allowed for the value of the stock to fall around 50% in the space of only two weeks.
More recently, Bitcoin and Ethereum seem to be in recovery mode after a multi-month breakdown. As was seen in February 2021, the stock price of SOS is correlated to these asset prices. Whilst SOS has settled at a price of approximately $2.81, there may be future upside for it if the rebound in cryptocurrency prices continues.
Brief technical analysis also shows that the value of the shares was relatively overvalued following this spike, as the relative strength index (RSI) reached highs of around 87, indicating the stock was in an overbought state. Additionally, the average true range (ATR) rose from 0.22 to 1.54 in a six-day timespan, indicating excessive volatility – this suggests a certain price level cannot be maintained, and may be one of the reasons, alongside the RSI value, why a selloff was initiated.
After a multi-month breakdown, Bitcoin and Ethereum seem to be in recovery mode. As was seen in February 2021, the stock price of SOS is correlated to these asset prices. Whilst SOS has settled at a price of approximately $2.81, there may be future upside for it if the rebound in cryptocurrency prices continues.
SOS Ltd’s stock started March by opening 1.29 points above last month’s close. This bullish movement maintained its momentum for a few days up until 4th March, where a trend reversal was observed. Despite breaking the $6.50 support level, the value of the stock was able to recover slightly on the final trading day of the week, closing at $6.50 (a 7.26% overall increase).
Data from the various stock sentiment features available on the StockGeist.ai platform was used to identify certain thresholds, calculated by finding the relative difference in the number of negative/positive messages compared to the largest of the other two categories. A percentage was then calculated to determine how often the value of the stock would increase/decrease under the specific threshold. The average price change for that threshold was also calculated, by subtracting the opening price from the closing price of an hourly period. For example, when there were 50% more (1.5x threshold) positive informative messages than negative or neutral messages, the price would increase by 0.11% on average; 50% of these price changes were positive (increases)
Results and Reflections
The accuracy test shows that a correlation exists between the number of positive/negative messages and the value of the stock. Emotional messages in particular show stronger correlation; for example, a threshold of 0.75x (25% fewer) negative emotional messages gave an average price decrease of 0.33% with 100% accuracy for this week of trading. This reflects the increasing evidence of social media’s relationship with the stock market. While the informative positive messages may not have been entirely accurate in determining increases in SOS Ltd’s share price, it is important to remember that this data works best alongside an additional set of information that is also provided by StockGeist, such as fundamental metrics and the world cloud.
Despite the offering of 23.88 million more warrants for the purchase of their American depositary shares, which dilutes shareholder value and causes a fall in the share price, SOS Ltd’s stock price today ($2.57 on 31st July 2021) is slightly higher than prices one year ago ($2.42 on 31st July 2020). The more recent six months have experienced much higher volatility and we can expect this to continue into the future. This is partly due to SOS Ltd’s increased cryptocurrency mining capabilities, which provides a deeper link to Bitcoin’s price and aggregate hash rates, and the ongoing volatility associated with this. Additional sources of volatility include SOS Ltd’s strained investor relations, the political relationship between US and China, and regulatory challenges, such as China’s recent change in attitude to cryptocurrency miners.
SOS Ltd is continually exploring its mix of FinTech and computing-related businesses, from their Bitcoin mining projects, to their plans for a supercomputing centre in Qingdao. A key long-term driver of its share price will be to solidify traction and profitability in one, or multiple, of these business areas. Resolutions in SOS Ltd’s recent SEC filings reveal the potential to issue more warrants, diluting shareholder value as it has repeatedly done so in the past, and the share price may suffer if ongoing dilutions occur. Ultimately, there are countless more factors influencing SOS Ltd’s share price, given the complexity and volatility of its business. In this study, StockGeist’s sentiment data and news highlights accurately reflected price movements following the company’s warrant offering in the first instance, which suggests that data presented by StockGeist can act as a useful trader sentiment tool to predict further movements in these times of uncertainty for the company.
This report and analysis of SOS Ltd’s stock was performed to determine whether positive messages detected by StockGeist translated into an increase in stock price, and whether negative messages translated into a decrease in stock price in this article’s analysis. Please note that this analysis is not investment advice.