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Investment Opportunities

ESSC Stock: Social Media Mentions Leads to +100% SPAC Rally

Shares of blank check company East Stone Acquisition Corp (Nasdaq: ESSC) exploded over 100% last week with no news to justify the run. But ESSC stock is now trending in the wrong direction after failing to hold any support.

East Stone announced its plans to merge with China’s JHD Holdings earlier this year to bring the company public on the Nasdaq exchange. The business combination will trade under the ticker ESSC as a result.

Up until now, ESSC stock has been relatively quiet, trading just over $10 a share. But last week, a few social media mentions led to an explosive rally. Despite poor SPAC performance overall this month, shares of ESSC stock ran to all-time highs as retail traders pushed the stock higher.

Is the rally just another pump and dump scheme, or does the company have real potential? Keep reading to find out what to expect from ESSC stock.

ESSC stock forecast.

Why Is ESSC Stock Trending

After a few mentions on social media sites, ESSC stock was off to the races. Retail traders were quick to notice the stocks low float.

In East Stone’s recent 8k filing, shareholders redeemed over 10.5 million shares of the original 13.8 million shares outstanding. Also, ESSC stock sees low daily volume, with just over 700,000 shares traded daily.

Not only that, but with several options tied to the share price, movements can be fast-paced. With this in mind, the combination can often lead to explosive stock rallies. It’s what traders refer to as a “gamma squeeze.”

Share prices closed at $14 on Friday, December 10, and opened almost 10% higher Monday, the 13. By the end of the day, share prices reached a high of $19.35 before closing slightly lower at $18.40. Then, Wednesday, ESSC stock soared over 40% to reach share prices over $26.

That said, share prices are fading since reaching all-time highs. At the time of this writing, ESSC shares are trading just over $11 per share.

It shows the power of social media and how quickly information can spread. But was the rally a technical trade? Or does ESSC stock have long-term potential? Let’s see what business is behind the blank check company.

What Is JHD Holding

In February, East Stone Acquisition announced its merging with JHD Holdings to bring the company public. The move comes to help fund the business and promote future growth.

JHD Holdings is a “merchant enabled” Platform that helps businesses grow by providing retail and technology support. What’s more, the company focuses on lower-tier cities in China, a market in need of support. The company offers services such as:

  • Logistics
  • Payments
  • Supply chain
  • And tech support

With this in mind, JHD Holdings serves a network of around 90,000 stores with a lot of room for growth. The company estimates that out of 550 million in the market, 250 million people have no bank account, which is a massive opportunity for them.

So far, JHD does business with 4,800 loyalty stores, serving 1.4 million loyalty members.

And on top of this, China is one of the fastest-growing economies. Despite slowing growth this past quarter, China still achieved 4.9% growth. Plus, services are a strong point with spending starting to pick up.

More importantly, China is looking to promote growth and economic stability in 2022. The latest news suggests that the country could stimulate the economy with growth slowing.

If this is the case, JHD Holdings could see a big boost due to higher consumer spending.

What to Expect From ESSC Stock

All in all, investing in SPACs can be difficult. At first glance, it’s just a blank check company with no revenue. On the other hand, they can offer excellent investment opportunities to get in on the ground floor of some of the most exciting companies.

When it comes to ESSC stock and JHD Holdings, the market potential is what intrigues me. China is a massive market opportunity, and particularly the underserved areas. JHD’s target market includes over 6 million stores needing financial and tech support.

If they can capture even a portion of this market, it has the potential to generate massive sales.

At the same time, Chinese stocks are a tough group to invest in with uncertain policies. Earlier this year, China’s government decided to crack down on tech stocks after leaders like Jack Ma rose to fame. As a result, tech stocks based in China sunk on the news. Corporate giants like Alibaba (NYSE: BABA) are still recovering from the policy changes, down almost 50% this year alone.

Is It Worth Investing in ESSC Stock

With momentum slowing, ESSC stock is back to pre-rally levels, just over $11 a share. The business merger has potential, but it could be a challenge accommodating to China’s policies.

The stock gained the attention of investors paying attention to the SEC reports being filed. Yet a few days later, and here we are, not much to show for it. The move isn’t likely to generate much attention outside of what it already has.

Furthermore, growth stocks are struggling with macroeconomic factors changing. Growth is taking the biggest hit, with the fed suggesting three rate hikes in 2022.

On the other hand, JHD is in the right market and has real potential to grow into a market leader. With that said, it’s not going to be an easy path to get there. If you are looking to invest in ESSC stock, expect some volatility as the company gets off the ground.

With a low float an army of retail traders watching, anything is possible. Just don’t fall victim to buying because you read to do so on a social media thread. If you believe in JHD Holdings and the market they are addressing, it could be a good long-term holding.


About

Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.

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