It’s been a crazy year for the RC365 (LSE: RCGH) share price, which at one point was up around 1,000%.
Its shoot-the-lights-out growth has lured in traders and investors, who were all asking themselves the same question. Can this little-known fintech specialist carry on climbing? Or will it crash the moment I buy it and wipe out my stake?
I can’t say for sure what will happen next. However, I do have my suspicions, based on how similar stocks have been performing lately.
What goes up…
RC365 was founded in Hong Kong in 2013 and debuted on the LSE in March 2022 with a market-cap of £6.7m. It runs a secure payment gateway service that helps members of the Asian community make efficient cross-border transfers.
When I last examined the company on 27 July, it was worth more than £163m, after rocketing 866% over 12 months. I concluded that I didn’t have anywhere near enough information to consider buying it. Management had only published one annual report and a half-yearly follow-up, and they weren’t exactly brimming with detail.
The only clear reason I could see to buy the stock was its incredible share price performance. As we know, past performance is no guide to the future.
RC365 looks uncomfortably like a meme stock to me. There are a lot of them about. Most investors will remember the hubbub surrounding GameStop and AMC Entertainment in 2021. Their shares flew as traders egged each other on to buy the troubled firms via social media forums such as Reddit subgroups and WallStreetBets.
There’s been another bout of meme-stockery on global exchanges in recent weeks. Fintech firm SoF, software maker Palantir and homewares company Tupperware Brands have seen their shares double, triple and quadruple, respectively, this year. Car retailer Carvana rocketed 450% in just six months.
Vietnamese electric-vehicle startup VinFast Auto, which listed on the Nasdaq as a special purpose acquisition company (SPAC) on 15 August, accelerated 689%. That briefly made it the world’s third biggest car maker after Tesla and Toyota. Its market cap peaked at a staggering $191bn. By Thursday 7 September, VinFast was worth $47bn, having fallen around 17% in a day.
I don’t buy meme stocks
It looks like RC365 is going through the same process. It has crashed 50% in the last month. While it’s up 200% over one year, that’s all down to legacy growth.
Like many meme stocks, it’s flying on tiny trading volumes, which makes outsized share price movements more likely.
With VinFast, 99.7% of the company is controlled by one man, Pham Nhat Vuong, Vietnam’s richest person. At RC365, CEO Chi Kit Law holds 69.75% of issued shares. Investors are scrapping over the remainder. I won’t be joining them.
I don’t know much about RC365 and it may prosper in future. But I do know this — I’m not going anywhere near it. I’ll stick to buying companies where I can see and understand the long-term case for buying and holding them, ideally for a decade or more. I won’t chase short-term gains or succumb to FOMO (fear of missing out). I think the only thing I will miss out on here is the opportunity to lose a whole heap of money, quickly.
