U Power (NASDAQ: UCAR) is a recent IPO addition to NASDAQ and at one point immediately after entrance it was up 1,100%. This obviously marks the UCAR stock out as something that will attract considerable speculative interest. Any stock that has moved like that will be attractive as a bet to those who think that it might move like that again. Markets don't have to be logical, they are composed of human beings after all.
True to that analysis there have been a couple of significant jumps upwards to be followed by declines in the weeks since. Speculation on volatility we understand - that's playing the game of trying to read other peoples' reactions. And yes, we're aware that small cap newly IPO'd stocks, especially if they've something to do with the Chinese market, can be subject to such volatility.
And yet, as we've said before, we simply do not buy the underlying story: “But then we agree, we're not sure about the basic premise in the first place. Battery swapping - the central idea here - doesn't strike us as a technology that is going to gain great market traction. Firstly, given the weight of lithium batteries most designs now incorporate them into the very structure of the machine - they're not a replaceable part. Second, as we know, batteries decay over discharge cycles. They idea that people will be happy to accept unknowns in replacement for their own and known - well, that strikes us as a lemons problem. We agree that we could be wrong, there's an awful lot of the world that works the way we're not sure it should. But it's still true that we don't quite accept the basic idea here.”
U Power stock price from NASDAQ
We do grasp the fun of playing in something subject to significant volatility. That's what we're all all about after all, chasing capital gains from price movements. So we're not saying that U Power is something to avoid. What we don't get it what the long term proposition is. As one analysis of UCAR has it: “The company has limited revenue, is losing money, and has limited capital to work with, even after its IPO. U Power Limited faces risks associated with standardization, an opaque balance sheet, and the political environment in China.”
Or as we might put it, U Power is a stock for trading, not one for investing in.
