NEW YORK (TheStreet) -- 500.com (WBAI - Get Report) plummeted nearly 10% after a downgrade from Deutsche Bank and as China-based stocks get hammered over Thursday's session. By mid-afternoon, shares took off 9.9% to $40.
Deutsche Bank downgraded the Chinese online lottery service to "sell" from "hold" with a price target of $26.
"We believe the run-up in 500.com shares leaves it exposed to perennial issues around licensing and regulation. The [Ministry of Finance], for instance, is likely close to issuing new sports lottery licenses and maybe even welfare licenses (the latter positive to 500.com if it becomes a recipient). A limited licensing regime would likely be positive for 500.com, but many licenses could drive up competition," wrote analyst Alan Hellawell in the report.
Prior to the day's losses, the Shenzen-based business had climbed 121.7% since its New York Stock Exchange debut at the end of November.
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The downgrade comes on a day when China-based, U.S.-listed stocks are already under pressure. Earlier, Securities and Exchange Commission Administrative Law Judge Cameron Elliot ruled Chinese units of accounting firms KPMG, Deloitte & Touche, PricewaterhouseCoopers and Ernst and Young were barred from auditing U.S.-listed companies for six months. The ruling was in connection to the firms deliberately failing to give regulators audit papers for Chinese companies investigated for accounting fraud. The firms said they plan to file an appeal against the ruling.
Also hurting stocks, Chinese manufacturing data contracted for the first time in six months. China January PMI shrank to 49.6 from the previous month's 50.5.