After touching the $0.525 resistance on Wednesday, ZAAP shares made a small and almost insignificant downside correction. The stock closed 3.18% lower at $0.495, a value exactly equal to the middle of the trading range. The 418,000 was not an ordinary value though, being three times higher than the average trading volume of ZAAP.
It looks weird that the stock is accumulating volume in the past three trading session, since the latest significant events around the company were announced about a month ago and were related to the company’s proposed acquisition of a 51% interest in Zhejiang Jonway Automobile Co., Ltd., a Chinese manufacturer of automobile spare parts and UFO brand automobiles. In the middle of September, ZAAP announced to have received one of the needed regulatory approvals.
The Equity Transfer Agreement dates back to the beginning of July and ZAAP is supposed to pay $29 million for the 51% interest. ZAAP also states in the 8-K from that time that it has the right and intends to acquire the remaining 49% by March next year. The market got really excited on the news, but it remains unclear if it really believes that the combined expertise of the two companies will finally lead to a profit, instead of million dollar losses each quarter.
Something adding to the uncertainty is that ZAAP speculative nature and high volatility is very attractive for shorters. On Tuesday, the portion of shorted shares reached 75% of the entire trading volume, and yesterday it was 40%. As there are further conditions to be met before the Zhejiang acquisition is complete, the high speculative interest this week may suggest that some news are expected to come anytime. Otherwise, this could be considered just the normal trading pattern of ZAAP stock.
