Why Luokung Technology Stock Soared Today

What happened

Shares of Luokung Technology (NASDAQ:LKCO) were climbing today as investors got a shot of hope that the company could stave off a delisting from the Nasdaq exchange, following an earlier order from the Department of Defense requiring a group of Chinese companies providing aid to the Chinese military to be delisted.

The stock was up 42.5% as of 10:47 a.m. EDT today on the news.

A stock chart going up

Image source: Getty Images.

So what

Xiaomi (OTC:XIACY), the Chinese smartphone maker and one of the companies on the Pentagon’s blacklist, got a win in court late Friday after a judge temporarily blocked the ban on Americans investing in the Chinese electronics maker. In a preliminary injunction, U.S. District Judge Rudolph Contreras said that Xiaomi could “suffer irreparable harm in the form of serious reputational and unrecoverable economic injuries.”

Xiaomi’s Hong Kong shares gained as much as 12% this morning.

The announcement also lifted shares of Luokung, a Chinese mapping technology company, as it seemed to convince investors that Luokung could get a similar reprieve. 

Last week, Luokung also said that it had received a letter from the Treasury Department, saying that any restrictions on the stocks would not take effect until May 8, a delay from a March 15 start date, effectively giving the company close to two months to win a reprieve like Xiaomi just did. 

Now what

Luokung is a penny stock, so it tends to be volatile even under ordinary circumstances. The stock soared in February on news that it was gaining exposure to the fast-growing electric vehicle (EV) industry as its acquisition candidate eMapgo Technologies announced that it would partner with an EV maker, Beijing New Energy Automobile. 

While the Xiaomi announcement and the delay in Luokung’s ban until May is good news, this issue is far from resolved. Investors should keep an eye on updates on the prospective ban, and expect shares to continue to be volatile over the coming weeks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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