ReTo Eco-Solutions Inc (NASDAQ: RETO) is flying in the premarket hours this morning, trading on gains of well over 100%. While the stock is running for the top, there has been nothing by way of press releases or SEC filings. So, what’s the deal?
There seems to be two rumors and a short squeeze at play. Here’s what’s going on:
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- ReTo Eco-Solutions May Be an Olympic Provider
- Rumors Surrounding a Merger With Apple
- The Short Squeeze
- Risks to Consider Before Buying RETO Stock
- Final Thoughts
ReTo Eco-Solutions May Be an Olympic Provider
As mentioned above, there are two rumors likely playing a role in the strong gains we’re seeing in the value of ReTo Eco-Solutions stock this morning. The first of these rumors has to do with the 2022 Winter Olympics.
According to various social media posts, investors are awaiting an announcement surrounding involvement in the Olympic Games in Beijing. The rumor suggests that the company’s work with the 2022 Olympics in Beijing will be expanded, exciting investors.
Rumors Surrounding a Merger With Apple
There’s another rumor hitting the tape too, and this one’s the big one. According to various social media posts, investors are awaiting the announcement of a merger.
According to these rumors Apple is interested in merging with RETO.
Of course, this is just a rumor. There has been no confirmation from either side, nor have there been any public mentions of talks between the two companies. Nonetheless, if Apple and RETO were to merge, the premium on the deal would likely be pretty large, providing a significant return on investment for those involved.
The Short Squeeze
What we’re seeing in the market this morning may prove to be the beginning of a short squeeze. At the moment, the stock trades with a short percentage of the volume at about 18%. Sure, that’s not the 20% or higher that I normally look for in terms of short squeeze opportunities, but it’s close enough to pay attention to, especially when the stock has more than doubled in the premarket.
At the same time, the heavy short interest on the stock, combined with the ultra-tiny public float of under 15 million shares could lead to supply and demand related jumps in value. Ultimately, as the shorts race to cover their positions, demand for shares rockets, but with only under 15 million shares available to the public, the demand increase for RETO shares could lead to tremendous gains, far and beyond the more than 100% gains we’re seeing this morning.
Risks to Consider Before Buying RETO Stock
If you’re considering buying RETO stock, you’re going to have to be willing to accept risk. After all, there’s no such thing as an investment that doesn’t come with risk of loss. Some of the most significant risks to consider include:
- Profitability. ReTo Eco-Solutions is far from a profitable company. Sure, the company generates revenue, but that revenue, and then some, covers expenses. If the company can’t reach profitability with the funding it has on the balance sheet, it will likely look to public markets to raise funds, leading to dilution of existing shareholder value and potentially significant declines.
- Penny Stock. RETO is a penny stock and comes with the added volatility you’d expect to see among this category of stocks. High levels of volatility make timing entrance and exit decisions difficult and could result in significant losses.
While there are clearly risks to consider before diving into ReTo Eco-Solutions, as there are with any other stock, the stock is worth a position on the watchlist. Sure, today’s run in value seems to be caused by two rumors, and there’s no telling if these rumors are true, but if they are, it’s great news for RETO investors.
RETO is already working as part of the 2022 Winter Olympics. As such, expansion of that agreement doesn’t seem too far fetched. As far as the Apple Merger, well, there’s no telling what Apple has up its sleeve, but if the merger takes place, it would be a great thing for investors.
All in all, I’ll be keeping an eye on RETO stock ahead.