Some big investors didn’t want to be part of a small Wilsonville business with new battery technology. But day traders are captivated.
On its second day of trading, shares of Oregon-based ESS Tech climbed from $ 10.42 at Monday’s close to $ 26.28 on Tuesday morning.
Nearly 55 million shares had traded as of 10:30 a.m. Tuesday, up from just 3.1 million after the action debuted on Monday. It turned out that the small stock caught fire among day traders looking for the next big thing.
It’s quite a turnaround for the company, which got off to a rocky start on Wall Street last week. ESS went public through a Special Purpose Acquisition Company, or SPAC. It is a publicly traded investment fund that merges with a private company, providing the company with private equity and a Wall Street quotation.
After-sales services are a new way for companies to go public. But the ESS deal did not go well. Most of its PSPC investors pulled out last week, cashing in their shares for $ 10 a piece rather than accepting a stake in ESS.
Now that ESS has started trading on the New York Stock Exchange, the company has apparently found favor with day traders. Shares got off to a slow start on Tuesday, but surged 27% after CNBC published a flattering article on the company, noting in its headline that one of Bill Gates’ investment funds has a stake.
Several posts were then posted on the online discussion forum Reddit, popular among day traders, extolling the ESS and its association with Gates.
Stocks soared on Tuesday morning, climbing nearly 150%. ESS says it will take at least a month before the small business is able to calculate its market value, but strong trading on Tuesday suggests it will be well above the $ 1.1 billion the company had targeted.
There is no definitive explanation as to the cause of the sudden rise in the value of ESS. The driving force may be the enthusiasm of small investors for newly public PSPC stocks and for clean energy companies.
Day traders, in other words, who bet on hot stock quotes in high-paying households.
ESS says its technology could store electricity generated by solar and wind farms during times when the sun is not shining and the wind is not blowing.
The company has only 165 employees and only projects $ 2 million in revenue this year. But projects sales of $ 37 million in 2022, $ 300 million in 2023 – and $ 3.6 billion in 2027.
Before PSPCs, small, star-eyed businesses pitched their big dreams to venture capital funds and private investment firms accustomed to taking risks. Thanks to PSPC, these small businesses are now more easily able to advocate their case with retail investors.
It’s a two-edged sword, however.
Stocks themselves often turn out to be fads, with their stock prices fading sharply over time. And public companies with inflated stock prices can come under pressure from short sellers betting stocks will fall, or from lawyers who accuse those companies of making unrealistic promises and breaking them.
This is what happened to electric vehicle maker Eugene Arcimoto, which has been plagued by attacks from short sellers and lawsuits by investors. Its shares, which were trading above $ 36 in February, are now selling for less than $ 11.
Large publicly traded companies have their own lawyers and investor relations departments to deal with such ups and downs. It’s more difficult for small businesses, however, which must report to shareholders quarterly and fund their legal and corporate offices with modest revenues.
This does not mean that trendy stocks cannot ultimately succeed as businesses. But sometimes being a public company makes success more complicated.