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Tantech Holdings Down 41% Premarket – Following 60% Jump Yesterday

Tim Worstall
Tim Worstall trader
Updated 2 Dec 2021

A stock price that yoyos, leaps around, like that of Tantech Holdings (NASDAQ: TANH) could be regarded as a traders’ dream, providing it’s possible to get on the right side of those movements. However, that’s not always easy as the past year’s stock performance has been a pretty consistent decline.

The cause of the leap yesterday was the announcement of a stock placement to increase the working capital of the company. The cause of the swoon – to below the original price – premarket seems to be a reconsideration of the effect, even the joys of that stock placing.

Tantech itself can be considered to be a slightly odd company. The unit, the corporation, that is listed is in fact a maker and wholesaler of bamboo charcoal which isn’t normally the sort of stuff of stock market dreams. However, it’s the 70% owned subsidiary that makes electric vehicles – delivery and the like, in China – which is interesting. The bamboo is fun to talk about but isn’t really relevant, that’s just how the corporate structure has worked out over time. 

One question that assails such companies entering the capital heavy manufacturing business is well, how are you going to finance this? It is, after all, that capital heavy business? 

So, when Tantech announces that it is going to issue new stock there are various possible responses. When it is defined that the offer will be underwritten then the price rises – soars even as it did yesterday. The company will gain more capital to push forward with plans, it’s underwritten, we know that it will gain that money. 

Of course, this does mean dilution for current stockholders but still, more capital into the business is good. 

That’s yesterday’s announcement from Tantech. People were interested enough that the stock price jumped from 94 cents to $1.53 over the afternoon.

However, that announcement from Tantech left a number of things unsaid. Yes, more money into Tantech is good but how much money into Tantech? How many shares will be issued, at what price? What is the dilution factor going to be? 

We start to get answers a little later. The actual SEC announcement, not the corporate PR one, has blanks in it for shares to be issued. Also for the price. That’s not quite so much what people want to see. Yes, the basic idea of more capital into Tantech meets with approval – thus the price jump – but perhaps more of these details, even hard facts, could have been worked out beforehand? So this morning’s slump in the stock price back down to below where it was at the start of yesterday.

Which way that price will go in full trading is unknown and a trading opportunity. The stock might well continue to be very volatile until those actual prices and volumes are known and thus the real effects of the capital raise can be calculated.

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Tim Worstall
Tim Worstall is a freelance writer specialising in economics and the financial markets.