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Origin Agritech’s Corn Contract Sends Stock Soaring; But It’s Not a SEED to Plant Yet

·2 min read

Origin Agritech (NASDAQ:SEED) stock shares are rallying hard on Thursday, with the upside accompanied by heavy volume. As opposed to the average volume of about 426,000, roughly 15 million shares were exchanging hands in the session. Notwithstanding the liftoff, SEED stock is still trading way off its all-time highs of north of $180 reached in early 2006.

Does the recent rally mark an inflection higher for the stock?

The immediate catalyst for the upside is a press statement from the company regarding execution of agreements to sell 50,000 metric tons of nutritionally enhanced corn to two feedstock companies. The company estimates the total value of the contract to be around 150 million yuan (roughly $23.6 million).

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Origin Agritech, as the name implies, is an agricultural technology company developing genetically modified crops and seeds. The company was founded in 1997 and is headquartered in Beijing.

The Agri biotech company announced in early February that it expects its fiscal year 2022 revenues to rise 300% year-over-year to 150 million yuan. It also expects to swing to a profit in 2022.

Chinese companies, especially the obscure ones, are very often panned as fly-by-night operators. Their stocks are invariably pump-and-dump schemes. This makes one wary of Thursday’s announcement. Thursday’s press release was highly promotional and short on details. The company has neither named the clients nor has it given the duration of the contract.

Additionally, given that SEED stock is listed in the U.S. through the variable interest entity route, investors should take cognizance of delisting risk. The U.S. has already shortlisted a few Chinese companies for not complying with the audit disclosure norms and marked them out for potential delisting.

Thanks to the short-term uptrend seen since early February, Origin Agritech stock has reached a neutral zone, based on the 14-day relative strength index. Technically, a break above $10 could add strength to the rally. However, there is too many risks involved in considering Origin Agritech stock as an investment option.

On the date of publication, Shanthi Rexaline did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Shanthi is a contributor to InvestorPlace.com as well as a staff writer with Benzinga. Equipped with a Bachelor’s degree in Agriculture and an MBA with specialization in finance and marketing, she has about two decades of experience in financial reporting and analysis, and specializes in the biopharma and EV sectors.

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