By Shashwat Chauhan
May 28 (Reuters) – Shares of biotech-turned-AI company Rocket One jumped almost 40% on Thursday as the company rebranded to capitalize on hot investment themes, a strategy many smaller firms have pursued with mixed success over the years.
Formerly called Hoth Therapeutics, Rocket One Inc announced earlier this month that it would restructure its business to pursue opportunities in AI infrastructure, semiconductor technologies and AI computing.
Rocket One was trading under its new name and ticker for the first time on Thursday.
The frenzy around the space economy is relatively new, though AI has been a dominant theme on Wall Street for some time now. Footwear maker Allbirds and social media firm Myseum said last month they were pivoting to AI and added AI to their names, driving a sharp jump in their shares.
“Companies that started years ago, that are struggling and trying to raise money and find investors – how do they do that? They completely shift their narrative,” said Todd Schoenberger, chief investment officer at CrossCheck Management in Washington DC.
“This is exceptionally dangerous for people because you really need to look behind the curtain and understand what these companies are doing.”
In a statement on Wednesday, Rocket One said it will focus on developing space-based AI systems for satellites, but did not offer any financial projections or funding plans.
The company did not immediately respond to a Reuters request for comment.
Hoth Therapeutics had been developing an experimental skin treatment drug, but the company was yet to report any revenue from its operations and posted a net loss of more than $2.6 million in the March quarter. It aims to continue its biotech business under a separate subsidiary.
Rocket One had a market capitalization of just over $26 million as of last close and its shares were up 39% to $1.9 on Thursday, hitting a more than eight-month high.
Several small companies whose legacy businesses have no connection to AI have announced a pivot, underscoring how the sector’s status as a magnet for investment capital can also provide firms a chance to raise funds.
While it has led to a near-term share spike, shares of some of these companies have failed to hold onto the gains.
Space exploration garnered huge investor interest after Elon Musk’s rocket company SpaceX unveiled its filing for an initial public offering (IPO) last week, which saw smaller space stocks including Rocket Lab and Intuitive Machines rally.
Over the years, other companies have abruptly switched gears to cash in on buzzy themes, most notably the explosion in cryptocurrencies.
Generally speaking, the U.S. securities regulator only requires that big changes in a listed company’s focus be disclosed to investors, although stock exchanges and index providers have separate rules and may scrutinize such changes.
Nasdaq, for example, began requiring shareholder votes and increased disclosures in some cases where companies switched focus to start hoarding crypto tokens on their balance sheets, according to media reports last year.
Long Island Iced Tea shares rallied after shifting its focus from iced tea to blockchain and revamping itself to Long Blockchain Corp in December 2017. The company sold off its legacy beverages assets in 2019.
The Securities and Exchange Commission did not respond to a Reuters request for comment.
(Reporting by Shashwat Chauhan in Bengaluru and Michelle Price in New York; Editing by Devika Syamnath)
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