U Power Stock Forecast: UCAR sheds 35% after explosive IPO

It had to come back to earth eventually. Following Thursday's statospheric IPO, U Power (UCAR) stock is down 35% at the open on Friday to $28. After listing its shares at $6, the Chinese micro-cap focused on EV battery-swapping technology saw its shares rise as far as $75 before closing just above $43. 

The NASDAQ, S&P 500 and Dow were flat at Friday's open.

U Power stock news

Very little is known about U Power. The micro-cap stock says it has a vision to become "a comprehensive EV battery power solution provider in China," but it does not appear to have any revenues to speak of at the moment.

Trading on Thursday had to be halted 22 times due to the volatile price action of UCAR stock. The reason for the price action moving so wildly is that the company only sold 2,416,667 shares at IPO. Small allotments at IPO mean that demand can easily overtake supply quickly, which is why the stock moved up 620% in just one session. When it traded up to $75 mid-session, its return was above 1,000% briefly.

This type of Chinese IPO has happened a number of times over the past few years with other lightly-traded stocks like Magic Empire Global (MEGL) exploding 5,800% on its IPO in mid-2022 before eventually giving back 99% of its gains. The NASDAQ briefly halted all Chinese IPOs last October to look into the issue. What all of these issuances have in common is that they offer microscopic floats in order that demand easily exceeds supply.

U Power is expected to have gross proceeds of just $14.5 million following the IPO after underwriting expenses. The stock was led by a single book runner – WestPark Capital – although Orientiert XYZ Securities Limited was listed as a co-manager. The company said it will use the proceeds for "developing and marketing UOTTA-powered EVs, manufacturing and developing UOTTA-powered battery-swapping stations, developing and upgrading UOTTA technologies, and working capital purposes."

U Power stock forecast

The sell-off in U Power stock means that bulls will look for another entry. Most of these micro-cap Chinese stocks have a few days of surges before bulls give up and take their profits. Thus far, we have seen some resistance around $40 and some support in the area between $28 and $32. Interestingly, U Power is not yet in overbought territory on the Relative Strength Index (RSI).