News & Analysis

It's no yolk! Newegg Commerce stock spikes by massive 204%, then goes down 16%

Andrew Saks, Wednesday, 14 July 2021

It is a widely held perception that stock traders need to 'shell' out often, must be calm enough not to be 'egged' on by temptations, and should 'lay' off making rash decisions as they can come home to 'roost'.

Quick pause whilst the tumbleweed blows across a deserted floor.... I'll get my coat.

Mirth and merriment may be received with mixed levels of appreciation of a Wednesday morning, but there is reason to be jubilant because volatility in tech stock is here.

Newegg Commerce Inc, a Californian computer hardware and consumer electronics company that is listed on the NASDAQ exchange has been subject to some genuine ups and downs during the last few days.

A flat line of utter blandness for a long period of time had perhaps contributed to the anonymity of Newegg Commerce among traders, however at the end of last month, it suddenly rocketed, resulting in a staggering 204% rise in the last 30 day period, peaking yesterday  at $31.74 per share.

This morning, the shares have declined by 16.45%, which still keeps the Newegg stock at a five-year high apart from its peak yesterday, but still, 16.45% on its own is a substantial downward move which immediately followed a massive upward surge.

Rather oddly, the algorithm driven data that forms the mainstream news charts have marked Newegg Commerce stock down as one of today's biggest 'losers', but a massive spike representing a five-year high followed by an admittedly volatile drop which still makes it much higher than any other point in the last five years apart from yesterday’s heights hardly makes it a loser.

What it does do, is mark it out as suddenly volatile and, rather predictably, now well and truly in the meme stock category.

When Newegg went public in May through a reverse merger with special purpose acquisition company Lianluo Smart, it did not garner investor notice. But the availability of option-based trading in early July caused stock prices to head for the stratosphere.

The meme stock frenzy is fuelled by people constantly looking for SPAC listings, either of new start-ups with no background, or obscure, off-the-wall choices like Newegg which has its traditions in the legacy business of providing components for people to build their own computers, something that was hugely popular - and I used to do regularly, back in 2001 when Newegg was founded.

Nobody does that anymore - when was the last time you saw a beige desktop computer with an equally beige tower taking up legroom under the desk?

The company initially filed for IPO in 2009 under the traditional method, however that did not proceed, and here we are 12 years later, and the firm resorted to the SPAC method, which listed it on NASDAQ and put it firmly in the sights of the meme stock movers.

In the period between its initial IPO attempt and now, Newegg has embroiled itself in controversial lawsuits trying to fight patent trolls, which are individuals and entities attempting to extract false settlements from companies by falsely accusing them of abusing patents on products that they had actually invented themselves.

 In January 2013, Newegg won a victory over Soverain Software when the Court of Appeals found in favor of Soverain and invalidated a shopping cart patent by citing prior art from 1984, CompuServe’s Electronic Mall. On January 13th, 2014, the Supreme Court refused Soverain Software's petition for writ of certiorari to rehear a January 2013 decision of the Court of Appeals, effectively ending Soverain's case.

In November 2013, Newegg lost a case in Texas against TQP Development over Newegg's use of https:// protocol mixing SSL and RC4. Whitfield Diffie and Ron Rivest, the inventors of public-key cryptography and RC4 encryption respectively, testified for Newegg.

This mentality gave Newegg its media presence, however today it is a different matter altogether and likely will appeal to a whole different audience, intent on following eggsagerated stock price movements..... groan. 

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