Secoo Holdings (NASDAQ: SECO) stock leapt 140% Tuesday for no clear nor apparent reason. That's the sort of price move that is often followed by a fallback and so it has come to pass Wednesday morning. After that rise SECO is down 18% Wednesday morning premarket. The big question is what is likely to happen next?
As to what Secoo does it's an online marketplace out in the Far East, SE Asia if we prefer. The claim is that the company has the highest average sale number of any such markets in the area. That's interesting, as a major cost of such marketplaces is traffic capture - the cost of getting someone to interact with the site in the first place. A higher average sale could therefore translate through into a higher gross margin after customer acquisition costs. Although that does, obviously enough, depend upon the pricing structure, they might be working on thinner margins to begin with in order to gain that higher volume trade per sale.
Secoo Holdings stock price from NASDAQ
As to the rise yesterday there's no obvious news or event to drive it. There's no particular measured level of short interest so therefore it's unlikely to be a short squeeze. Could be that as a microcap (a $10 million market capitalisation) it's just one of those things that happens. It doesn't require much trade to move something that size. In the current febrile markets concerning AI we could imagine that being a driver inn something so small. That's the sort of rumour that could cause that sort of price move, certainly.An interesting speculation is that Secoo is to adopt a ChatGPT-style function on its sites.
If that's so then we'd probably all expect that price to continue to drift back down. For the story is that they're likely to use an AI as a form of chatbot to interact with the customer base. That's unlikely to make all that much difference - chatbots do already exist after all. Even if a ChatGPT driven chatbot were significantly better it's not going to do that much to either attract to the site or boost the spend once there. So perhaps we should conclude, in the absence of other evidence, a storm in a teacup here.
