Leju Holdings (NYSE: LEJU) is experiencing a surge in its stock price, joining the ranks of Chinese microcap stocks that have seen a similar trend. This phenomenon seems to be part of a larger meme stock activity happening in the market. The stock price movements do not appear to be driven by any specific reasons or company announcements. In fact, the last results from LEJU were released a month ago. However, despite the lack of catalysts, the stock price continues to rise rapidly.
It is worth noting that these price increases are short-lived. Not long ago, stocks like AMTD or MEGL could maintain absurdly high prices for weeks or even days. In the case of Leju, the stock started rising yesterday and increased by 96%. As of premarket trade, the ticker shows an additional 107% increase. However, the price has already retreated by around 50% from its morning highs. While there is a trend of meme stock movements in Chinese companies, each individual price move seems to have a diminishing long-term effect.
It is important to emphasize that there is no objective justification for these stock price changes. The prices are driven solely by people's willingness to buy and sell at certain levels. This phenomenon can be referred to as meme stock status, but it is essentially a "ramp" where a small company with a low market capitalization experiences a surge in price. As a result, the crowd follows suit. This can be profitable for those who bought early, but it becomes a risky endeavor for latecomers. The question is not if the price will eventually stop and revert, but rather at what price and in what minute.
While these meme stocks can be entertaining for those who benefit from them, they can be disastrous for those who end up on the wrong side. Since we are not the ones driving the ramp, we are likely to be the losers in this speculative gambling rather than investment.