Why Shares of 500.com Limited Popped 75% Today

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What happened 

Shares of 500.com Limited (NYSE:BTCM) jumped as much as 75% in trading on Tuesday after announcing an acquisition and as Bitcoin (CRYPTO:BTC) briefly climbed to over $50,000. Shares settled at a 38.9% gain as of 3:20 p.m. EDT. 

So what

500.com announced that it will issue 44.4 million Class A shares to acquire the Blockchain Alliance, amounting to about 10% of the company’s shares outstanding. This includes the acquisition of BTC.com and the mining pool business of Bitdeer Technologies.

A Bitcoin symbol laying in the dirt.

Image source: Getty Images.

On top of the acquisition, Bitcoin traded above $50,000 and was a positive sign for the company’s shift to bitcoin mining. The rise in Bitcoin’s value is analogous to an underlying commodity rising in value for a mineral miner. 

Now what

This is still a speculative growth stock, but with Bitcoin on the rise, there’s good reason investors are bidding up 500.com today. But we also need to remember that the company’s revenue was just $1.4 million in the fourth quarter and right now, the market cap of 500.com is $1.2 billion. That’s a highly valued stock that could crash just as quickly as it’s risen in this volatile market. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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