An Unwarranted 100%-Plus Spike In Medalist Diversified REIT's Stock Price

Summary

• Medalist's stock spiked more than 100% on Wednesday after "pump and dump" day traders promoted the stock on a nominal press release.
• Weak financial performance and outlook in retail and hotel properties demonstrate a massive disconnect between MDRR's post-spike stock price and fundamental value.
• Positive signs have emerged with an increase in rental collections and contracting of hotels with universities.
• The preferred stock represents a much more attractive investment option than the common equity, but at lower prices.
• Whether or not the company shows improvement in cash flow will be key in the coming quarters.

Stock Spike

Medalist’s stock price soared on Wednesday for a triple digit gain after the company was pumped in after hours trading Tuesday. The stock price change appears to have little to do with any fundamental change in the company or positive results, but traders seeking to pump the stock price higher and sell after making a quick gain.

Source- Yahoo Finance

The strategy enacted is known as a gap and run. After the stock price spiked in after hours, traders rushed into the stock in the early morning hours. The stock spiked from as much as $1.18 per share at close Tuesday to over $6 per share mid-day Wednesday. Since then, the stock price has come back down to $2.85 per share.

What Prompted the Spike?

MDRR declared a $.50 per share preferred dividend on Tuesday. The company provides occasional press releases on business updates and dividend declarations. MDRR’s preferred dividend declaration does nothing to change the fundamental value of the company. However, speculative “pump and dump” traders appear to have capitalized on the news by promoting the company as a buy.

Such is done rapidly in trading chat rooms, email lists, and social media activity. By distributing the news that the company is a buy to followers, traders bid the stock price up significantly. There are no major leases signed, acquisitions made, or apparent buy out rumors that indicate such an increase in the stock price is warranted.

Portfolio Overview

Medalist currently owns six properties, including three retail shopping centers, two hotels, and a flex industrial property. The company operates exclusively in the Southeast region, and their current properties are located in North Carolina, South Carolina, and Virginia.

Source- Company Website

The company struggled immensely after going public, and covid has accelerated company challenges. Rent collection levels were down, and hotel

Analyst’s Disclosure:I am/we are long MDRR.PA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.