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Why Shares of Seven Stars Cloud Group Are Soaring Today

By Timothy Green - Dec 18, 2017 at 1:05PM

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Cryptocurrency mania is driving up the value of this unprofitable company.

What happened

Shares of Seven Stars Cloud Group (NASDAQ: SSC), which focuses on supply chain and digital finance solutions powered by artificial intelligence, jumped on Monday. There was no company-specific news, but with Seven Stars having announced a blockchain-based initiative earlier this year, it's safe to say that the surge in cryptocurrency prices is the main driver behind this gain. The stock was up 23% at noon EST, although it was down just two hours earlier.

So what

Seven Stars stock has risen about 240% since Sept. 1. The company announced on Sept. 28 plans to launch an asset-backed securitization, tokenization, and exchange platform by the end of the year, claiming that it will be the first such platform to be powered by artificial intelligence and blockchain.

A coin with a B on the face, against a background of a chart.

Image source: Getty Images.

This buzzword soup has pushed up shares of Seven Stars against the backdrop of rising cryptocurrency prices. Bitcoin has risen from a few thousand dollars to nearly $20,000 over the past three months, and other cryptocurrencies have surged in price as well. Seven Stars is far from the only stock to surge due to the cryptocurrency boom. E-commerce company Overstock.com is one other example, up about 200% since Sept. 1.

Now what

Seven Stars' market capitalization now sits at around $300 million. The company generated $107 million of revenue over the past 12 months, with a gross margin of just 3.9% and a net loss of $25 million. The stock's surge is being driven by speculation, not the fundamentals.

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