ROOT
📉 Root Inc. has faced significant financial challenges, including near bankruptcy, requiring reverse stock splits to maintain Nasdaq listing requirements.
📊 The company is showing signs of growth, but its high volatility makes it difficult to manage risk effectively with traditional stop-loss strategies.
⚠️ The presenter advises caution due to the stock’s volatility and the difficulty in setting appropriate stop-loss levels, making it a challenging investment.
@VisionariosBolsa:
“Let’s see Root. Root, is this not blockchain or something like that? Ah no, this is the one from the insurance app. Yes, but this one was about to go bankrupt in its day, right? Let’s see the monthly. Yes, this company was the one that was about to go bankrupt. Well, actually, in recent years, there have been a lot of companies about to go bankrupt. Root was about to go bankrupt, Dave was about to go bankrupt, all these companies that you see that went to cents and that had to do a lot of reverse splits, like, notice here it tells me that the maximum was above 4400. This company has not traded at 4400 in its life, but of course, they went to… Root, the same thing tells me that it has the highs at $530. This company has not traded at $530 in its life. What happened is that it went down, to meet the Nasdaq requirements, no company can trade on the Nasdaq if it is a penny stock, that is, if it is below a dollar, the Nasdaq kicks you out. You have to make a readjustment, so you make a readjustment in your shareholding, and in that way, what you do is raise the price of the shares. That is, if before you had 100 million shares at 50 cents, well, you make those 100 million shares reduce to 50 million shares, but now each share is worth $1, and you are already complying with the regulations. That’s why we see those crazy prices, and I say, they were companies that in the end, when it changed, there were many companies, and small ones, especially, notice that this is a small-cap company, 2.3 billion, that depended on debt, on financing, and on the good economy. Well, hey, if it starts to go wrong, you can no longer borrow at the same price, they will no longer give you loans so easily, and everything becomes more complicated for you. In fact, notice that it is a company that lost a lot of money. Companies that lose a lot of money tend to depend on debt, they are the ones that suffer the most in these periods, and obviously, well, many went bankrupt, and many were close to bankruptcy. But well, now it is interesting, they are 2.3 billion again, and it is at 50, they will have to do a split now after having done the reverse splits. At a fundamental level, it is growing well. It is true that these data are being compared with degrowth. Here, in the last quarters, it is already being compared with good quarters, but the forecasts are perhaps not so good, and well, at a technical level, what I don’t like very much is that it is very volatile, and that a company goes up does not mean that you can make money from it. There are many companies that go up and that I cannot make money from in life. Why can’t I make money? Because they are so volatile that they are very difficult to operate, very difficult. Of course, if you are a person who invests and closes your eyes and does not put a stop or anything, okay, but if the company goes down, where do you place the stop here? A stop of 10, of 5, is useless because the company is so volatile that it can knock you down to continue rising because those are the natural ranges in which the company moves. But then what are you going to do, put a stop of 20%? If it triggers, there we go, you have to be going for a return of 200% because otherwise, it doesn’t make sense. So I think that such volatile companies are very complicated unless I see that suddenly it starts to compress ranges, to tighten, wait for the average, and not like here, that notice that it comes to the average, goes back up, comes back to the average, goes back up, this is super complex to operate.”
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