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Newegg was valued at more than 12 times its sales last year as of Wednesday.
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Shares of online electronics retailer Newegg Commerce jumped 148 percent on Wednesday, increasing the company’s amazing six-day run to 560 percent, in a new and dramatic example of the Reddit-driven meme stock phenomena. Newegg’s market valuation has risen to roughly $25 billion as a result of the move. On Wednesday, the stock’s trading volume surpassed 75.5 million shares, or 75 times its typical daily turnover. According to Nasdaq data, the stock experienced six trading halts in the Wednesday session due to the volatility.
Many gamers and PC customers will be familiar with Newegg (ticker: NEGG), a 20-year-old company. The current scenario began in 2016, when Lianluo Smart Limited, a Chinese technology corporation, purchased a 56 percent share in Newegg for $2.6 billion. The two firms signed a merger deal in October 2020, in which Nasdaq-listed Lianoluo (formerly known as Dehaier Medical Systems) gained full control of Newegg. Consider it like a SPAC transaction: By combining with a small Nasdaq-listed firm with few other activities, Newegg effectively went public.
According to a June 13D filing, Zhitao He, a Chinese billionaire, is Newegg’s largest investor. According to the report, He holds 224,394,418 Newegg shares, or nearly 61 percent of the company’s outstanding shares. The stake was worth $15.2 billion as of Wednesday’s closing price of $67.57. According to a recent filing with the Securities and Exchange Commission, Newegg expects $2.1 billion in revenues in 2020. That means the company was valued at more than 12 times last year’s sales as of Wednesday. To put that in context, the electronics retailer in the United States
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(BBY), which has a market price of $27 billion, has $47 billion in sales in the January 2021 fiscal year, or 0.6 times sales. Newegg did not reply to requests for comment right away. The Newegg trade showed indications of crumbling in late trading, with the stock down 9% to $61.79. Eric J. Savitz can be reached at eric.savitz@barrons.com./n
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