Shares of SOS Limited (SOS -1.28%) fell as much as 30.3% in trading on Friday after a short-seller announced a position in the stock. Shares closed trading down 21%.
Hindenburg Research announced on Twitter that it is short the stock and thinks it's "an obvious China-based shell game." The firm highlighted that the company's stated headquarters is a hotel, among other claims.
SOS Limited has claimed that it's begun mining cryptocurrencies and is starting blockchain security and insurance and banking businesses. That's what's driven the stock up over the past month. But investors should be skeptical about a swift shift to a hot part of the market, especially from foreign companies that have a history of questionable corporate reporting.
Investors should take any short-seller report with a grain of salt because their motivations are to push the stock lower. With that said, we should also understand the bearish argument in any investment and this report brings up questions that investors should consider if they're bullish on the stock.
This isn't a stock I am jumping into today, but it'll be important to hear what management says and how it refutes these claims now that they're public.