Shares of Triterras (TRIT) took off like a rocket on Thursday, rising by just shy of 58% in the first hours of trading. That massive gain didn't entirely stick, but as of around noon EDT, the stock was still up by a massive 36%. And it all relates back to things that happened in January.
Some background is important here. Triterras came public via a merger with a blank check company in late 2020. It uses blockchain technology to provide trade finance services, putting it in a hot technology-related space as it looks to offer a potentially disruptive service.
The story here looks pretty interesting, perhaps even compelling. However, in January, a short-seller put out a report that highlighted material concerns about Triterras. Among many other things, it cited potentially questionable "related party" transactions, as well as data that indicated the service might not have been attracting as many users as the company had been reporting.
Triterras delivered a strong rebuttal to that short report almost immediately. It also announced that it would use the weakness in the share price at the time as an opportunity to initiate a $50 million stock buyback. However, the report left an unsavory taste in investors' mouths. The board, doing proper due diligence, looked into the matter, with an original expectation that an independent appraisal of the company's financial statements would be complete by the end of September. That didn't happen. Instead, the appraisal results actually hit the market today.
According to the company, "...the Audit Committee has concluded that the allegations contained in the short report lack either factual support or material basis. Accordingly, the Audit Committee has concluded that those allegations do not require additional action by the Company."
The market took that as an all-clear, and -- with a material overhang on the stock apparently resolved -- investors jumped on the shares.
Things can get pretty crazy when a short-seller gets involved in a stock. And because Triterras is fairly new to the public markets and operates using a still-emerging technology, it's even more complex to value its shares.
Seeing Thursday's update as a positive is probably the right way to look at things, but there are still a lot of other things investors ought to understand about Triterras and its blockchain-enabled business before buying in here. And, after such a huge gain in one day, a lot of optimism may now be priced into the stock. In other words, don't get too caught up in Thursday's exciting move, despite the interesting story behind it.