The stock markets can often be a bit irrational and that can be seen in the price action in certain stocks over a significant period of time. That brings us to the subject of the Exela Technologies (NASDAQ:XELA), which has emerged as one of the biggest gainers this year so far on the back of Reddit fuelled speculation and specific news related to the company.
In this situation, it might be a good idea to take a closer look at the company and make up one’s mind about Exela.
Earlier on this year, a short squeeze had resulted in a major rally in the stock and later on there was renewed interest in the stock after the automation services firm announced that it was going to start offering intelligent document processing. However, the financials do not paint a particularly exciting picture. Back in June, Exela raised $85 million from the $150 million at the market offering.
The company noted that the money was going to be used for cutting down debt and interest expenses. However, it also meant that there had been considerable stock dilution at Exela and that is a significant red flag when it comes to the valuation of a company’s stock. Hence, it might be argued that the rally in the stock may be irrational.