The tiny Chinese tea seller whose shares trade more than Tesla’s

Bit Brother, a Chinese tea retailer that has branched out into cryptocurrency mining, is an unlikely candidate to top the trading leader boards in the vast US stock market.

But for the past two months an average of 572mn shares in the lossmaking firm, whose market value is less than $2mn, have changed hands each day. That is more than any of the biggest names in corporate America including Tesla, the $565bn behemoth whose stock is often frenetically traded.

Bit Brother, which changed its name from Urban Tea in 2021 as it expanded into “blockchain-based” services, is emblematic of a trading boom taking place in some of the market’s cheapest shares. Activity in so-called “penny stocks”, whose shares are worth less than $1 each, rose to nearly 20 per cent of overall stock market volumes in December and was still 14 per cent in January, up from around 6 per cent in prior years, according to Cboe Global Markets.

Much of the activity has been driven by retail traders who got hooked on the stock market during the 2021 meme stock craze, when buying by small investors sent retailer GameStop skyrocketing.

But this time it is trading volumes, rather than share prices, that are soaring. That is due not only to the greater number of retail investors trading the stocks, but also to the growing popularity of sometimes-controversial equity fundraisings that can flood the market with new shares. The bloated share counts push up trading volumes but can weigh heavily on stock prices, particularly for lossmaking groups.

“Retail tends to like these low-price stocks because they think that ‘Hey, if it only goes up a penny [then] I’ve doubled my money’,” said Larry Tabb, head of market structure research at Bloomberg Intelligence. “More than likely they buy it and it continues to go down. It’s a very dicey game.”

Heavily-dilutive fundraisings, and the resulting share price falls, have helped swell the number of US-listed companies trading below $1 to 517 as of…