Singapore ride-hailing and carpooling company Ryde saw its share price plunge by more than 80 per cent in the past week, a development that market analysts described as concerning, though they added that it can happen to some small technology firms listed in the US.
Ryde, which is listed on the New York Stock Exchange (NYSE), collapsed to US$2.08 at the close on Sep 12, from US$13.11 the day before and US$12.14 a week earlier.
On Sep 11, the stock had reached a high of US$22.49.
Associate Professor Ben Charoenwong from Insead Singapore noted that Ryde’s last announcement was a partnership with Singapore insurance provider Singlife in August, and Ryde’s share price had been flat until September.
“Then, seemingly out of nowhere, the stock surged over 40 per cent on Sep 6, only to dramatically reverse course shortly after,” said the finance expert.
He noted that Ryde usually sees about 20,000 to 200,000 shares traded daily. But in early September, this jumped to over a million shares.
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“It appears some large traders might have started building positions around Sep 3, driving up both volume and prices. This likely caught the attention of other investors who jumped in,” said Prof Charoenwong.
On Sep 11, the stock then plummeted over 60 per cent on a volume of almost nine million shares.
Ryde debuted on the NYSE on Mar 6, opening at US$4, with around 2.7 million shares traded during regular hours. Its initial public offering raised US$12 million.
Prof Charoenwong noted that the sudden rise and plunge of the stock in September raised eyebrows as the company had not made any announcements during the period.
But he added that the movements could also have been driven by momentum-based investors trying to detect patterns of price movements.
“If any large trades were enough to push prices above some level, quantitative traders and algorithms may simply pile in. Then, once any news failed to materialise and the price impact is revealed to be transitory, then the algorithms may reverse their positions and cut losses.”
He added that as a micro-cap stock, Ryde is more vulnerable to these kinds of movements due to lower liquidity and often less regulatory scrutiny.
He noted that such price patterns are also “fairly rampant”. For example, Grab also saw volatility following its special purpose acquisition company (Spac) merger. It has fallen some 70 per cent since its Nasdaq listing and has failed to recover so far.
In May, Singapore-based telehealth provider Mobile-health Network Solutions plunged 85 per cent after the stock surged more than 580 per cent in its first weeks of trading in April. The stock has also not recovered.
Prof Charoenwong said: “These types of price trends are more common with newly listed companies, those undergoing major transitions like Spac mergers, micro-cap stocks, or stocks with low liquidity.”
Nirgunan Tiruchelvam, head of consumer and internet at investment firm Aletheia Capital, agreed that it is not unusual for small technology companies on the Nasdaq to see such volatility, adding that it is unconnected to the fundamentals of the firm’s business model.
Professor Mak Yuen Teen from NUS Business School said the sharp drop might have been due to the market thinking bad news is coming, or a large investor selling shares.
“The business challenges of ride-hailing firms are well-known, with increasing costs and regulation and a challenging path to profitability,” he added.
Moomoo Singapore chief executive Gavin Chia pointed to several factors that might have caused the crash, such as the firm reporting losses.
“Additionally, the stock has faced heavy sell-offs after the company’s recent secondary listing on the Frankfurt and Stuttgart stock exchanges in June, which may have caused a loss of investor confidence,” he said.
“These issues, combined with intense competition in the ride-hailing and quick commerce industries, have put further pressure on the company’s ability to maintain market value.”
Ultimately, investors have to do their due diligence and be wary when a stock experiences large price corrections, said the experts.
Prof Charoenwong cautioned: “It’s also wise to check regulatory filings… Do not blindly follow forums, social media or influencers without doing your own background work.”
Chia of Moomoo also said investors should evaluate companies based on aspects such as financial health and profitability, as well as investor confidence levels, as stock sell-offs or high volatility can indicate market concerns.
Professor Lawrence Loh from NUS Business School said: “Investors should assess the underlying reasons when there are unexpected surges. They should not just go with the flow, especially if the price increases may reflect exuberant market sentiments.” THE STRAITS TIMES
