Please ensure Javascript is enabled for purposes of website accessibility

Why Dada Nexus Limited Stock Was Going Up Today

By Jon Quast – Jun 18, 2020 at 12:27PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A very recognizable name owns over 10% of the stock.

What happened

Shares of new IPO Dada Nexus Limited (DADA 3.38%) were going up on Thursday, after a well-known player was revealed as a major shareholder. As of 11:45 a.m. EDT, the stock was only up 5%. But it had traded 14% higher earlier in the day.

By itself, perhaps the news wouldn't be enough to move the stock very much. But Chinese companies are under increased scrutiny these days. Gaining this shareholder may give investors confidence in Dada Nexus' business.

A hand plots an arrow going higher on a chart.

Image source: Getty Images.

So what

Dada Nexus is delivery logistics company in China. It provides last-mile delivery services, and partners with retail companies like grocery stores to deliver orders. And it turns out Walmart (WMT 2.18%) owns 10.7% of Dada Nexus stock. Considering Dada Nexus already partners with Walmart in China, it's not terribly surprising to discover Walmart is a part-owner in the company.

In 2020, Chinese-based companies trading on U.S. stock exchanges have come under increased scrutiny. On May 20, the Senate passed the Holding Foreign Companies Accountable Act. The bill has yet to be signed into law, but it would require companies like Dada Nexus to comply with the Public Company Accounting Oversight Board. Foreign companies that don't comply could be removed from U.S. exchanges.

Now what

Luckin Coffee is a prominent fraud example, and is a good reminder why investors might be nervous about foreign companies. But there are good foreign companies out there. You have to take things on a case-by-case basis.

Walmart has a direct business relationship with Dada Nexus, and that first-hand experience gives it confidence to be a big-time shareholder. It strongly suggests investors can have confidence in the legitimacy of Dada Nexus' business. However, whether investors should invest in the IPO is another question.

Walmart stock was unchanged with the news.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Luckin Coffee Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Walmart Stock Quote
Walmart
WMT
$132.53 (2.18%) $2.83
Dada Nexus Limited Stock Quote
Dada Nexus Limited
DADA
$4.89 (3.38%) $0.16
Luckin Coffee Inc. Stock Quote
Luckin Coffee Inc.
LKNC.Y
$16.24 (-1.58%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.