Nukkleus Inc (NASDAQ: NUKK) is up another 50% this morning as investors continue to cheer its $26 million acquisition of Star 26 Capital that marks the fintech’s pivot into the defense sector.
The announcement is being positively received as Star 26 Capital has a controlling stake in RIMON – a company best known as a supplier of components for Israel’s Iron Dome missile defense system.
In total, Nukkleus stock has rallied an enormous 750% over the past 24 hours.
Still, investors should practice caution as NUKK could crash just as quickly as it has soared since Tuesday morning.
Nukkleus stock is prone to manipulation
Nukkleus stock runs the risk of losing its recent gains just as quickly primarily because it’s a penny stock in essence, which means it’s highly volatile and can be subject to large price swings.
It’s going for about $19 at writing – but was hardly worth anything more than $2.00 only before the Star 26 Capital news.
So, it’s conceivable that the ultra-low price tag on NUKK is being manipulated by traders to drive up the price before they dump it all back to make a profit.
And it’s not like Nukkleus shares currently pay a dividend to appear any more attractive as long-term holding.
DOGE could hurt NUKK’s pivot
Nukkleus’ pivot into the defense space is being well-received for now but investors should also consider the highly competitive nature of this sector that is subject to geopolitical risks as well.
Additionally, President-elect Donald Trump have named Elon Musk and Vivek Ramaswamy to lead a new initiative dubbed the Department of Government Efficiency (DOGE) aimed at cutting at least $2.00 trillion from the federal budget.
And Nukkleus stock, following the Star 26 Capital acquisition, could take a hit if the billionaires choose to cut some of that cost from what the US spends on defense.
Nukkleus Inc now has a market cap of about $40 million.
Nukkleus is not a profitable company
Despite a more than 10x gain, Nukkleus stock is still trading well below the price at which it started 2024.
What it means essentially is that investors had completely bailed on this Israeli firm before the Star 26 Capital acquisition – and for good reason too.
Nukkleus has recently lost its chief of finance, which could lead to uncertainty and instability within the leadership. Plus, the company is yet to pull out of significant losses.
Over the past 12 months, NUKK has lost a bit over $27 million. This raises concerns about its financial stature and long-term viability as well.
These factors, put together, suggest Nukkleus shares may be a very high-risk investment following the recent rally. NUKK is not really covered by Wall Street analysts either.
The post Nukkleus stock could crash just as quickly as it rallied: here’s why appeared first on Invezz