What happened
Shares of Society Pass (SOPA 2.92%) surged 53.4% on Wednesday, according to data from S&P Global Market Intelligence. This brings the three-day gain for the stock of the Southeast Asia-focused e-commerce company to a whopping 360%. The catalyst is the stock's addition to a major U.S. stock index.
Society Pass (also known as SoPa) is surely a new name to many investors, as it just held its initial public offering (IPO) on Nov. 9. Since the stock's IPO at $9 per share, it's up 81% through Dec. 22, though its closing price of $16.31 on this day is still considerably off its all-time high of nearly $52 per share, reached on Nov. 15.
Image source: Getty Images.
So what
On Sunday, Society Pass announced that its stock was being added to the Russell 2000 Index, effective at the open of the U.S. markets on Monday, Dec. 20. This index comprises 2,000 U.S.-listed small-cap stocks (stocks with market caps of $300 million to $2 billion).
Stocks almost always get a big boost following news that they'll be added to a major index because this means that index-based funds will have to buy them. Moreover, this type of news also increases a company's exposure to the investing community. As more investors become aware of the existence of a publicly traded company, some of them will probably decide to buy its shares.
According to the company's website, it's "building the next generation loyalty and data-focused marketing platform in Southeast Asia and South Asia. .... As more merchants and consumers in SEA and South Asia register on our Society Pass platform, more transaction data is generated. With more data generation, there are more opportunities for creating loyalty from consumers to merchants."
Now what
It's much too soon for long-term investors to consider buying Society Pass stock, which is highly speculative at this point. The company generated revenue of "just $17,289 in the first half of the year and much higher expenses due in part to stock-based compensation," as my fellow Motley Fool Jeremy Bowman pointed out following the IPO. Revenue should increase considerably, however, as the company has been making acquisitions.
That said, Society Pass seems worth watching given that it's focused on the intersection of e-commerce, which is increasing in popularity around the world, and a region whose population is solidly growing.
