Key points:
- Imperial stock is down 47% premarket
- This could be an indication that meme stocks don’t always work
- The significant recent stock issue won’t have helped
- Pandemic Stocks – Sell, Buy or Hold?
Imperial Petroleum (NASDAQ: IMPP) stock is down 47% premarket this morning after a 15% rise yesterday. There’s no obvious nor apparent news to explain this price movement so we might just put it down to the volatility of a meme stock. Folk get excited and then prices jump around.
On the other hand, we might start to think that perhaps the fact that Imperial has been a meme stock has led to a certain advantage being taken. Which way around we think of it is entirely up to us of course.
Imperial only joined NASDAQ last December and the $7.50 price was looking pretty rich at that point. Which might be why there was that quick tumble to $2 and change. Something that didn’t improve until March this year. The announcement of the purchase of several more medium-sized product tankers boosted the price back toward $8 and that seems to have been the result of some meme interest.
Also Read: What Happened to Meme Stocks?
The thing is, that was then followed by a significant capital raise and at a $1.60 price. Which is a heck of a discount from the close to $8. Perhaps that is the price the stock issue could be got away at but it sure dampened some of the interest.
A reasonable conclusion about this latest slump in the Imperial stock price is that some portion of that new issuance got dumped for whatever it could get. Or possibly even just in fear that it might.
The bigger question though, as always, is what comes next? The issue to grasp here is that shipping always, but always, goes in cycles. Trade flow increases, charter rates rise, therefore so do hull values. Thus new ships are laid down and come to market a couple of years later. But which point – possibly – trade isn’t rising so much and the market is oversupplied, charter rates fall, hull prices do, the oldest and least efficient ships get scrapped and the whole cycle starts again.
It’s entirely possible to make money out of cyclical markets – but the timing has to be right.
The oil market is of course booming at present. But that doesn’t in fact mean that the oil transportation market is. Certain shipping sectors are booming – container lines for example – but that doesn’t mean that the oil transportation one is. In fact, in the transport of oil products – rather than crude – it’s possible to assume that we’re somewhere near the top of the cycle. Imperial itself has been reporting falling charter rates on its vessels as an example.
It’s entirely possible to try trading Imperial Petroleum as a meme stock – to try to work out what others are going to think of it and get there before them. It’s also possible to try looking at the basics of the business itself. The trading strategies from each approach may well differ.