Please ensure Javascript is enabled for purposes of website accessibility

Why Qutoutiao Stock Skyrocketed Today

By Jeremy Bowman - Jan 21, 2021 at 6:39PM

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

The Chinese content aggregator soared despite little news.

What happened

Shares of Qutoutiao (QTT -5.54%) were soaring today even though there was no news on the Chinese mobile entertainment company. Instead, a possible short squeeze seemed to drive the surge in the stock, as shares closed up 61.3% on exceptionally high volume.

So what

Qutoutiao stock had been hit hard in December; the company had struggled since July, when Chinese state television (China Central Television, or CCTV) accused the company of selling suspicious ads with false information at an awards show.

Paper currency from the U.S. and China, with a small shiny globe as a paperweight

Image source: Getty Images.

Today, a group of traders seemed to pile into the stock, triggering a likely short squeeze as buyback orders were probably automated. Just in one day, 118 million shares exchanged hands, compared to an average level of 2.1 million over the last three months -- an extraordinary high volume for this small-cap stock.

About 12% of Qutoutiao shares were sold short as of the end of December, and many of those bears likely closed out their bets on Qutoutiao.

Notably, this wasn't only the small Chinese stock jumping today on no news. Uxin, an online used-car dealer, finished the day up 20%, and several Chinese education stocks rose by double digits.

Now what

The huge jump in Qutoutiao shares is also a reminder that the stock market is highly volatile and frothy these days, and day traders have seized on the boom in recent months to try to make a quick profit.

Qutoutiao shares are now the highest they've been since March. But this isn't a typical recovery story: The company's revenue fell 20% in its most recent quarter, as it's still dealing with blowback from the accusation by CCTV.

Given the mystery behind today's surge, this is probably a stock best avoided -- those gains could easily be given back.

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

Qutoutiao Inc. Stock Quote
Qutoutiao Inc.
QTT
$0.86 (-5.54%) $0.05

*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 service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

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.