Why Agora shares fell 22% on Friday
Actions of Agora (NASDAQ: API) fell 25% on Friday after the Chinese Communist Party (CCP) announced new sanctions against tech companies in its home country. At 1:39 p.m. EDT, Agora stock was down 22.2% on the day.
News circulated on Friday that the CCP was seeking to tightly regulate the private education and tutoring industry. TAL Education Group (NYSE: TAL) and Gaotu Techedu (NYSE: GOTU), two stocks operating in that space, were down more than 50% on the news. It was also reported by Bloomberg News that regulators are planning tough penalties against the rideshare company Didi Global (NYSE: DIDI) as well as after upsetting members of the CCP, which holds supreme power over companies operating in the country. Bloomberg report said Didi Global could be forced to pay an even higher fine than the $ 2.8 billion tech giant Ali Baba (NYSE: BABA) had to pay last month.
Agora will not be directly affected by these regulations, but investors appear to have been spooked by the news, which caused a huge sell-off in listed Chinese stocks on Friday.
Agora stock is now down nearly 50% this year. However, the company, which sells software to integrate real-time communication tools into applications, is still trading at an aggressive price-to-sales (P / S) ratio of 20.9. With the imminent threat of regulation from the CCP, there is no reason for investors to take a risk by investing in this security, especially when you combine it with such a valuation.
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