U Power (NASDAQ: UCAR) shares are up nearly 50% on Thursday. This continues the volatility since the recent IPO, which saw the price surge 600%. As we said about U Power, a 600% pop immediately after the IPO is a terrible failure of the banks that managed the IPO. As I said, the banks should allow UCAR to sell its shares. Selling something at a price that the market then assigns a price 6x means you sold it way too cheap.
That has now been corrected quickly. In fact, it took a full day for U Power to give up all those IPO pop gains and trade below the original issue price. So we may have been right in our comments, although we may have been a bit hasty. Yesterday’s 50% surge split between opening hours and aftermarket comes from below the IPO price. As such, we might just view it as continued volatility, or even the market struggling to place a realistic value on the new stock.
U Power share price from NASDAQ
As we’ve already noted, we’re not at all sure about the basic concept. What to work on battery swapping technology. We’re aware that this is being touted as a way to circumvent long charge times – it’s possible to envision mechanical processes replacing batteries much faster than they can be charged. However, we are also aware that battery performance degrades significantly with use – the number of charge/discharge cycles. So we suspect there’s a lemon problem in there. Who would want to swap out a known battery for an unknown one – probably those who know their own ones aren’t that good. Exactly the point for which Ackerloff received his Nobel Prize. The solution to such problems is a guarantee. But who would guarantee battery performance on a large scale?
So we’re not entirely sure that the basic idea really has any legs, although we’re not arrogant enough to insist that we’re on the right track here. What we would say is that UCAR’s current volatility is really about reasonably pricing this new IPO.
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