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Why SOS Limited Stock Was Down 20% in May

By Jon Quast - Updated Jun 7, 2021 at 5:04PM

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Falling cryptocurrency prices brought this stock down, but it's rebounding in June as investors note the company's commitment to renewable energy.

What happened

Shares of SOS Limited (SOS -4.41%) were down 20% in May, according to data provided by S&P Global Market Intelligence. The company reported impressive revenue growth early in the month. But these financial results were overshadowed but the plunging price of Bitcoin (BTC -8.99%), pulling SOS stock down as well.

So what

The price of Bitcoin cratered in May after Elon Musk questioned how environmentally friendly the process of mining was on social media. In a matter of days, the price of Bitcoin fell from around $55,000 to around $35,000. For its part, SOS has big plans in the cryptocurrency space, and the stock has skyrocketed over the past year as the price of various cryptocurrencies has soared. But in May, SOS stock fell as Bitcoin fell.

A frustrated investor closes their eyes with stock data displayed around them on computer screens.

Image source: Getty Images.

Somewhat ironically, SOS doesn't currently generate much revenue from Bitcoin. In 2020, the company's revenue was up over 300% year over year, but this was mostly for its insurance marketing business. In fact, 84% of revenue came from a single customer in its insurance marketing segment. That said, both Bitcoin and Ether (ETH -9.49%) (which is native to the Ethereum blockchain) figure heavily into the company's plans. For example, SOS announced on May 18 that over 6,000 mining machines had become operational during the previous month. Some of these are dedicated to Bitcoin, while other are dedicated to Ethereum.

In summary, SOS' insurance marketing business is growing just fine. One would have expected this small-cap stock to be up in May with financial results like that. But with the company's recent focus on Bitcoin and Ethereum, the stock fell as the prices of these cryptocurrencies plummeted.

SOS Chart

May returns for SOS stock compared to Bitcoin and Ether. SOS data by YCharts

Now what

It seems SOS stock is getting some renewed interest from the market -- the stock is up 15% for June as of this writing even though Bitcoin and Ether are slightly down. This might be because SOS management claims that it uses over 90% renewable energy for mining, distinguishing it from many other players in the space. Considering sustainability is suddenly top-of-mind for cryptocurrency investors, this is attracting attention to SOS stock.

This might be a short-term boost for SOS stock. But long term, the price of cryptocurrencies will need to keep rising in order for this stock to be a winning investment. And that's something outside of SOS' control.

Jon Quast owns shares of Bitcoin and Ethereum. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

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Stocks Mentioned

SOS Limited Stock Quote
SOS Limited
$7.37 (-4.41%) $0.34
Bitcoin Stock Quote
$21,455.39 (-8.99%) $-2,120.15
Ethereum Stock Quote
$1,700.26 (-9.49%) $-178.24

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

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