KXIN Stock Price Increases 101.33%: Why It Happened

By Amit Chowdhry ● Nov 21, 2020
  • The stock price of Kaixin Auto Holdings (NASDAQ: KXIN) surged 101.33% on Friday, November 20. These are some of the potential reasons why the stock price increased.

The stock price of Beijing, China-based Kaixin Auto Holdings (NASDAQ: KXIN) surged 101.33% on Friday, November 20. There was not any direct news from Kaixin that may have triggered the stock price movement, but there appear to be external factors.

As a quick background, Kaixin Auto Holdings started off with a used car dealership business model and the company was running 14 dealerships as of December 2019. Kaixin had been providing financing channels through its partnership with financial institutions along with insurance, extended warranties, and after-sales services. When Kaixin launched, it was operating as a subsidiary of Renren and then it combined with CM Seven Star Acquisition Corporation in May 2019 to go public. Renren still maintains a majority stake of Kaixin.

In August, Renren announced that Kaixin initiated legal proceedings against non-controlling shareholders of three of its dealerships due to disputes around operating issues. Those 3 dealerships accounted for a majority of Kaixin’s revenues in 2019. And the COVID-19 pandemic had a material adverse impact on Kaixin’s used-car dealership business, causing a significant loss of revenues. In order to resolve these major challenges, Kaixin has been reexamining the business model and the company halted its used-car dealership operations.

Earlier this month, a private Chinese company called Haitaoche took a majority stake in Kaixin. Haitaoche had signed a binding term sheet to buy a majority stake in Kaixin through a reverse merger. And Renren — which owned 79% of Kaixin — allowed Haitaoche to have a 51% stake in KXIN stock by issuing new shares.  

Haitaoche is known as being a China-based e-commerce platform for imported vehicles. In a press release about the merger, the Kaixin said that Haitaoche plans to strengthen its imported automobile sales business and expand into electronic vehicles. Plus Haitaoche is aiming to enter into strategic cooperation agreements with multiple electronic vehicle manufacturers in China and serve a wider group of distributors and consumers. And Haitaoche will contribute its vehicle sales business to the combined company as part of the merger. 

There were also a number of changes to senior management as part of the merger. Chen Ji and Jinfeng Xie have resigned from their positions as the company’s chief executive officer and chief operating officer, respectively, effective as of November 3, 2020. And the company’s board of directors appointed Mingjun Lin, the founder of Haitaoche as the company’s acting chief executive officer, effective as of November 3, 2020.

Lin has substantial experience in automotive internet media. Before launching Haitaoche in 2015, Lin held senior management positions with TOM Online and Tencent. And he was the founder of SUV.cn — a vertical online media that focused on SUV customer communities.

On Friday November 20, there was a broader stock price rally in the electric vehicle market. For example, the stock price of China-based electric vehicle company Xpeng increased by 12.01%. And China-based EV companies Nio and Li Auto also saw slight gains on Friday despite a drop in the three major indexes. Plus US-based Carvana — which has a business model that is similar to KXIN — also saw a slight increase on Friday.