Shares of LAIX (LAIX) is another participant of the short squeeze phenomenon. The company hasn’t released anything but seemed coordinated by social media much like what we saw from ATA Creative Global (AACG).
Short squeezes like this could potentially go far higher into 1,000% gains but before you think about investing, here are the risks associated with LAIX stock:
- Penny Stock. LAIX is a penny stock, which increases the risk associated with an investment. As a penny stock, it experiences heavy levels of volatility and operates a business model that’s not yet fully proven, making it a highly speculative bet.
- Emerging Markets. Emerging markets plays can be a dangerous concept. While China is emerging quickly, it’s common for emerging markets to hit bumps in the road, and when that happens, those involved in these markets often experience significant declines.
- Capital Risk. LAIX is far from profitability. If the company can’t turn a profit before the money in its bank account dries up, it will likely look to public markets as a way to raise funds, resulting in the dilution of existing shareholder value and likely significant declines.
Should you buy LAIX Stock?
I would not buy but if you’re willing to lose potential investment dollars and you’re comfortable with it then you’re free to participate in LAIX stock.