Ebet (NASDAQ: EBET) is a small scale online gambling company. As a gambling company we know that they always have an edge on any game being played. However, we should also know that that doesn't mean that they will be making money out of running gambling games. For while the odds might be such that there's always a turn to be had there will also always be the overheads that have to be paid. We should also perhaps note that not only does Ebet not make a profit at present, it's also not very large - turnover is in the ten to twenty million a quarter range.
Things though are worse than this. The American betting industry is gradually opening up - sports betting is becoming legalised state by state and so on. The major global gaming companies are expanding into this market and in fact there's a considerable landrace going on. So, competition is increasing. This has led to Ebet's gross revenues just about halving in this last quarter - although the decline over the last half year is less bad.
Ebet share price from NASDAQ
Given this background it's therefore more than just a little bit of a surprise that the stock price has near doubled - up 93% - this morning premarket. There is no corporate news to back this up. We are therefore operating on the assumption that there is no particular reason for this, we are watching a momentum trade. The price starts to move, people note that then pile in on the basis that the price is moving. Which is great - except of course momentum trades do reverse in time. The trick is to know when they're about to reverse.
We know of no reason why Ebet should be considered to be worth twice today what it was on Friday night. Therefore we do rather expect it to face back to being worth what it was on Friday night. The difficulty is that it might not go straight there making any short position fairly risky.
