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LumiraDx (NASDAQ: LMDX) stock up 134% on apparently silly rumour

Microcaps can get boosted by stories, rumours and momentum trades

Update : 23 Oct 2023, 05:06 PM

LumiraDx (NASDAQ: LMDX) stock is up 134% this morning. LMDX stock has not risen on some single rogue trade, at pour pixel time volume as over 12 million shares. This doesn’t mean that there is any good cause for the LMDX stock price rise of course. What we think has happened - and we’ll correct if new information comes to light - is that one little story has become the centre of some excitement. From there, in a low market cap (actually, near nano-cap, let alone microcap) stock all that’s needed is a few to follow the momentum trade.

The business under discussion: “LumiraDx Limited operates as a point of care diagnostics company. The company focuses on transforming community-based healthcare by providing critical diagnostic information to healthcare providers. It manufactures and commercializes a diagnostic platform that supports various tests with lab comparable performance at the point of care. The company has tests on the market and in development” Well, OK, that could be interesting and it might not be. There is revenue there, even if it’s 50% down on the same period last year. Significant losses are still being made.

But what might have happened to cause this?

LumiraDx stock price from Google Finance

The only recent story out there is this from last week: “LumiraDx Limited (Nasdaq: LMDX), a next-generation point of care diagnostics company, is pleased to announce a strategic collaboration with AstraZeneca and Everton in the Community to set up England’s first community-based heart and lung screening hub, set to go live in November. The official charity of Everton Football Club will run this novel screening hub from the recently opened People’s Place. The hub will provide the Merseyside community with access to the latest technologies and specialist input from a multidisciplinary team of primary care, heart, and lung specialists to focus on early diagnosis and early treatment for chronic breathlessness in a walk-in setting.”

Obviously, that’s fascinating. But a 130% rise in a stock price because they’re running a charity clinic? No, that’s not a rational stock marlket response to the event.

So, our view here is that this is a bit of interest in the LMDX stock on the back of this story. That has then ballooned into a momentum trade - or perhaps the memestock hodlers have got involved. Our expectation would be that, given there’s no substantive underlay here, the price rise will fade away soon enough. No advice on trading it, of course, for how far the trade will go and for how long before it reverses is just one of those unknowns.

 

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