RC365 Holding (LON: RCGH) is up 400% on the London Stock Market in this past 10 days and has been up 500% at times. This is, of course, a lovely price movement to be on the right side of. But doing that requires that we know what is actually happening here. And to be honest about it there’s no real reason this should have happened.
Well, obviously there’s a real reason otherwise it wouldn’t have happened but is there some objective reason it happened? Other than people simply speculating on the price we can’t see it, no – that we can’t see it doesn’t mean it isn’t there but we do at least have to try to be objective. Note that there’s nothing wrong with people simply speculating – it’s just that if that is happening then our own view of what might happen next could or would be very different than if we thought there was some objective valuation that could explain the price move in RC365 Holding.
The details of what’s been happening at RC 365 Holding
This past week there have been 300 to 400 trades a day, that sort of level, £500k to £1 million in value a day. The big thing is that most of these RC365 trades have been off book. This isn’t proof but it’s suggestive that most of the action is off either in the apps – e-Toro perhaps – or with the contracts for difference brokers. We’re getting a speculative flurry, yes, but we’re seeing it on the exchange as fairly large trades, accumulations of those smaller ones.
China financials and meme stocks
Well, OK, what might be happening? Our take here – and it is only a take, not a proof – is that the meme stock idea has now arrived in London. More specifically, something with AI is rather Twilight Zone these days, oooeeeeooo, and just the mention can make it jump. CXApp, up from $1.30 to $50 at one point. Then there’s been that flurry of Hong Kong financial stocks. MEGL, the AMTD twins, Top Financial, all had their time in the Sun. Microcaps, small floats, vaguely financial markets oriented, China’s a big place, well, maybe they are suddenly worth 50 times, 100 times, their starting price? Until they’re not of course – all have fallen back to roughly where they started.
And then we’ve got RC365 Holdings in London now. So, what’s the trigger here? It’s starts with a vague announcement about something that may happen. Then the RC365 share price goes wild and the exchange asks management what’s going on. We get a referral to that announcement. Then, finally, we get the announcement itself. So, we can see the thing that is driving the share price rise. Or, perhaps, just triggering it.
RC365 is to be paid $15 million to write an app for a wealth management firm. They’ll also split the revenues 50/50. Which, you know, huzzah and all that. And it includes AI this new app! Glory.
So, we’ve our heady cocktail here, AI, China, financial markets, really, how could this share price not soar?
Checking the RC365 details
Then it’s possible to have a closer read. It’s $15 million HKD. Which is some £1.5 million (OK, 1:10 for GBP to HKD isn’t accurate but it’s a close enough rule of thumb). It’s also not a new app, it’s the upgrade to V3.0 of the V2.0 which is currently operative. The Hatcher Group, the other party here, is a pretty small HK financial group – it’s not like RC 365 has been partnered up with Vanguard or anything. Hatcher does maybe £8 million a year in revenue. Also loses perhaps £4 million a year on that by the run rate of the past 6 months.
Oh, and for extra fun. Hatcher just sold down some of its shareholding in RC 365 Holding – yes, before this share price surge in RCGH.
Now let’s run through our information again. RC365 Holding is now worth some £100 million. That’s an £80 million or so rise in the market capitalisation. Off the back of a £1.5 million contract with an £8 million a year company? Ah, OK, so perhaps there isn’t an objective reason for this then. Possibly it is just meme stock status on offer to some HK vaguely financial stock that’s about China and mentions AI. You know, possibly.
Yes, meme stock, but what happens to RCGH next?
Well, now we know, or at least now we think we know. A speculative bubble. The difficulty is in knowing how to trade it. Going short always has its attractions but we do have to recall that AMTD at one point was worth more than Goldman Sachs. Memes can get well out of hand before they revert to reality.
Let’s just say that we wouldn’t be bull on RC365 Holding on any objective basis. How the speculative meme is going to work out, well, as that’s not logical it’s difficult to apply logic to it.
