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Why Luokung Technology Stock Fell Today

By Jeremy Bowman – Nov 2, 2021 at 5:15PM

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Shares of the Chinese tech company pulled back after its earnings report.

What happened

Shares of Luokung Technology (LKCO 2.66%) pulled back today after the Chinese mapping-technology company's first-half report indicated it could be facing a cash crunch. Luokung stock closed the day down 10.4%.

So what

The company reported revenue of $37.8 million for the first half of the year, up from $7.3 million, which was helped by the acquisition of eMapGo Technologies, a provider of navigation and mapping services and an innovator in autonomous-vehicle technologies.

Net loss in the period expanded from $18.9 million to $26.7 million and was unchanged on a per-share basis at $0.09. 

The Shanghai skyline with mapping indicators.

Image source: Getty Images.

CEO Xuesong Song credited the performance of the company's location-based services business for the growth in the business, which delivered $24.5 million in increased revenue. He added, "During the period, Luokung expanded its partnership base and began providing our premier portfolio of products and services for leading businesses across various industries, and worked to successfully overcome the challenges of being designated a Chinese Communist Military Company by the U.S. Department of Defense." 

Now what

Luokung stock has been highly volatile all year due to challenges in China and the market's own doubts about the Chinese small-cap tech company that was formerly on the Pentagon's entity list, meaning it was on track to be delisted from the Nasdaq

The sell-off may be a response to the company's weak balance sheet as it has just $14.5 million in cash, which won't be enough to run the business for long, considering it posted a loss of $26.7 million in the first half of the year. It also only had $30.6 million in current assets against $81.8 million in current liabilities, so the company will need a cash injection to pay its bills.

Luokung did raise $32.8 million in a direct offering in September, which should give investors some confidence. It's understandable, however, why the market is wary of a Chinese stock on shaky financial ground.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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