Investing

Meme Stock Movers for 10/27: Canaan, Cortexyme, Farmmi, Robinhood

The major U.S. equity indexes closed a bit higher on Tuesday but slid a bit in Wednesday’s premarket. Earnings reports from Boeing (missed earnings and revenues), Coca-Cola (beat on both) and McDonald’s (beat on both) are generally helping the Dow Jones industrials, although not by much. The big disappointment was a 5.5% decline in Bitcoin futures to below $59,000. Crude oil traded down about 1.3% at around $83.50, and 10-year Treasury yields were just under 1.6%.

In the meme stock universe, Robinhood Markets Inc. (NASDAQ: HOOD) saw the biggest interest in social media discussion. The stock traded down more than 9% in Wednesday’s premarket session to $35.90. A sharp drop in cryptocurrency trading hit the top line hard, and the number of funded accounts declined slightly as well. The company said that the slowdown may last through the end of the year.

Some investors were not unhappy. Cathie Wood’s Ark Invest funds added 625,000 shares to their holdings. Among WallStreetBets investors, the following comment by Trusty_Craftsman may have summed up the sangfroid: “I’d like to send a big thank you to HOOD for being HOOD. Puts are printing and I’m taking the profit to buy more stock in companies you restricted back in Jan.” That’s cold.

Chinese ag producer Farmmi Inc. (NASDAQ: FAMI) closed up nearly 13% on Tuesday and traded up more than 15% in Wednesday’s premarket. The stock doesn’t generate a lot of comment on social media, even though it trades some 122 million shares on an average day. Maybe its penny-stock status is keeping the chatter down. There’s something worth noting about Farmmi, however. Here’s how the company described itself in a recent prospectus filing registering 93 million shares of common stock and 275 million pre-funded warrants:

We are a holding company incorporated in the Cayman Islands and not a Chinese operating company. As a holding company with no material operations of our own, we conduct a substantial majority of our operations through our PRC subsidiaries, our variable interest entity, or VIE, and its subsidiaries in the People’s Republic of China. We control and receive the economic benefits of our VIE and its subsidiaries’ business operations through certain contractual arrangements. Our ordinary shares and the ordinary shares underlying the Pre-funded Warrants offered in this offering are shares of our offshore holding company instead of shares of our subsidiaries or VIE in China. The VIE structure is used to replicate foreign investment in China-based companies where Chinese law prohibits direct foreign investment in our VIE and its subsidiaries. As a result of our use of the VIE structure, you may never directly hold equity interests in our VIE and its subsidiaries.

Bloomberg’s Matt Levine had a good piece in July on what VIEs are and what investors do and don’t own.

Bitcoin-mining stocks took a hit Wednesday morning, thanks largely to the decline in Bitcoin. Most of these stocks closed down on Tuesday, with Canaan Inc. (NASDAQ: CAN) among the biggest losers, closing down about 3.7%. The shares were down another 6.5% in Wednesday’s premarket, despite no specific news.

The big loser in Wednesday’s early trading is Cortexyme Inc. (NASDAQ: CRTX). The stock traded down about 68% to $18.94, after dropping 2.7% on Tuesday. After markets closed Tuesday, the company disclosed that it has narrowed the pool of patients who may respond positively to its Alzheimer drug. The good news was that among patients for whom the drug did work, treatment slowed cognitive decline by 42% to 57%. More than 4.5 million shares changed hands Tuesday, more than 10 times the daily average of around 350,000.

A WallStreetBets commenter, u/le_norbit, asks, “Why would [Cortexyme] release results weeks ahead of expectation?” then offers an answer:

Earnings report will be in early November. Conference presentation will be Nov 9-12

If I knew the stock price was going to tank upon the report, I’d give it early. This way the stock price actually holds the gains from those two events.

Clearly they feel confident about their products considering they’re hiring an SVP of Commercial.

Good question and sensible answer. Cortexyme is trading well below its 52-week low of $26.66. BTFD investors are surely going to be taking a look at this one.