What happened
Shares of GigaCloud Technology (GCT -8.70%) were getting crushed on Tuesday. The business-to-business (B2B) e-commerce company's shares fell as much as 38.3%. As of 12:45 p.m. ET, however, shares were down about 28%.
The stock's slide is due to continued volatile trading following the company's initial public offering (IPO) last week.
So what
The Hong-Kong based company priced its public offering at $12.25 last week, but early demand for the stock suggests the pricing was conservative. At one point on Friday, shares soared to a high of $62. But the stock fell sharply on Monday and then again today. As of this writing, shares are trading below $30. While this is far below the stock's high last week of $62, it's still far above where the IPO was priced at.
Investors should note that volatility obviously has little to do with company fundamentals. Trading volume and volatility are so significant that the stock has seen its trading halted numerous times by the Nasdaq, including a trading halt this morning.
Now what
It may be wise for investors to stay on the sidelines for now. Given the stock's extreme volatility, GigaCloud's underlying business fundamentals don't seem to be much of a factor behind the stock's current value. Even more, it could be argued that the stock is potentially overvalued at this level anyway.
Sure, the company's revenue is growing fast. Revenue in 2021 increased more than 50% year over year. However, net income declined from about $37 million in 2020 to less than $30 million in 2021. Further, net income declined from about $8 million in the first quarter of 2021 to about $4.7 million in the first quarter of 2022.
Investors may want to wait for both more substantial earnings and earnings growth before they seriously consider investing in GigaCloud.
