Reddit-Fueled Penny Stock’s 6,400% Rally Reversing in Sydney
The Reddit meme stock fizzle is roiling an Australian penny stock.
IOUpay Ltd., a fintech firm that went into overdrive on a social media-backed retail trading frenzy, has plummeted in the past two months. The stock is set for more declines as the firm’s newly launched buy-now-pay-later services -- which allows customers to purchase goods and then pay for them in installments -- faces intensified competition in Southeast Asia from larger Australian rival Afterpay Ltd., say analysts.
IOUpay had drawn comparisons to U.S. videogame retailer GameStop Corp. after surging 6,400% in the past year as it has been the subject of several discussion threads on Reddit. The Reddit-fueled day-trading crowd turned the first quarter of 2021 into one of the wildest periods of stock market frenzy in modern history. Despite a more than 40% slump since mid-February, IOUpay remains Asia’s top-performing interactive media and services stock over the past year.
“We may see the price subdued for a long period of time as retail investors get bored waiting and sell out to find something more exciting,” said Carl Capolingua, an analyst at online brokerage ThinkMarkets Australia Ltd. “The question will be if they can get traction in the Asian markets they’re targeting before the bigger players come in.”
Shares of the digital transactions processor rose as much as 5.1% on Thursday before paring gains.
Last year, larger rival Afterpay acquired Singapore-based business EmpatKali, a payment solutions provider operating in Indonesia, signaling plans to expand in Southeast Asia.
The wild ride by IOUpay, which lists Standard Chartered Plc and Citigroup Inc. as its clients, began in June after it was touted by investors on Reddit. Its shares continued gaining on a “buy now, pay later” deal with Malaysian online marketplace Easystore. That partnership inked in February sparked a more than 200% rally in its stock over a three-day period.
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