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Here's Why SOS Limited Stock Is Gaining Back Lost Ground Today

By Jon Quast - Mar 1, 2021 at 10:58AM

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Management isn't taking allegations from short-sellers lying down.

What happened

Shares of SOS Limited (SOS 2.93%) were gaining back lost ground on Monday morning after management pushed back against various short-sellers. The stock fell roughly 60% below 52-week highs after some prominent short-sellers outlined their short theses. However, SOS management released a statement this morning that appears to be calming investors' fears. As of 10:30 a.m. EST, SOS stock was up a whopping 44%.

So what

On Feb. 26, short-seller Hindenburg Research released its short thesis on social media. To summarize, it believes shares are worth $0, as the company allegedly does business with dubious companies and has offices in buildings that are really just hotels. Culper Research released a similar short report the same day, agreeing with Hindenburg that shares are worthless. As a result, SOS stock plummeted 30% that day alone.

A businessman draws an upward arrow over a stock chart displayed on a transparent touchscreen.

Image source: Getty Images.

However, SOS management is fighting back this morning. In its press release, management said that allegations from short-sellers were "distorted, misleading, and unsubstantiated." However, it didn't provide a detailed response -- that's coming soon. While it prepares its in-depth response, it simply wanted to reassure shareholders, and that seems to be working, considering how much the stock is up today.

Now what

It's not uncommon for short-sellers to take aim at stocks that are flying high, spooking the market. And considering SOS stock is still up roughly 300% in the past year (even after falling so hard in recent weeks) it was inevitable this company would attract some unwanted attention. But the good thing for shareholders is that if management compellingly refutes the allegations and its business performs well in coming years, there won't be anything the short-sellers can do. In my opinion, strong business results will win out in the end.

However, for now, it's in SOS shareholders' best interest to at least consider the short-sellers' arguments. Sure, these short reports could be completely false in the end. But it's best to come to that conclusion for yourself after considering all the facts, not to be blindly dismissive. In the end, trying to see things from different perspectives will strengthen your own investing thesis. And having a strong conviction allows investors to hold tight through inevitable stock market volatility

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