Warning investors that your company may be on the verge of bankruptcy isn’t as bad as it sounds in the stock meme world.
Companies that have recently warned of impending bankruptcy have seen their share prices soar.
WeWork is the latest company to enter meme status as stock prices soar despite the bad news.
In the weird world of meme stocks, WeWork beware that she had a “fundamental doubt” about her ability to continue working Because massive financial losses mean it could be the next big thing for investors.
It may seem counterintuitive, but the playbook often used by the stock meme crowd is bidding the stock prices of companies that tell investors they could go out of business soon, a scenario that often kills everyone. The value of equity in the work.
WeWork is the latest example. This week saw its share price soar as much as 162% after it warned investors of its financial troubles. The stock traded up as much as 49% on Friday, but eventually cut those gains in half, to about 20%.
And WeWork isn’t alone. Shares of a trucking company Yellow’s stock is up about 800% since it warned investors from imminent bankruptcy earlier this month, while Tupperware stocks are up more than 800% Over the past three weeks despite the rapid deterioration of the financial situation.
The memory playbook for bidding on shares of failed companies with good brand recognition First launched in early 2021 with GameStop, A group of retail investors on Reddit piled into the struggling video game retailer and sent its share price to astronomical levels. the The phenomenon hit shares of AMC Entertainment Just a few months later.
A meme stock price boom, typically driven by retail traders who gravitate towards lower-priced stocks, can have a significant impact on the underlying company, as it can provide them with a new way to raise money by selling stock at inflated prices.
This is important because failed businesses usually have few avenues to turn when it comes to raising money, and selling stock is often a last-ditch effort before finally filing for bankruptcy.
In the case of WeWork, it has seen a sharp decline Since it was released to the public via a SPAC in 2021. The stock is down 98% since SPAC’s $10 transaction price, with its value dropping from a peak of $9 billion to around $500 million. This is after the company initially attempted to go public with a valuation of nearly $50 billion.
And according to data from YCharts, the battered shared-office company is yet to turn a profit, losing $16.4 billion since 2018. The flexible work-from-home trend and financial pressures on the commercial real estate sector haven’t helped the company. no The company’s revolving door.
While most investors flee at the first hint a company might suffer, the stock meme crowd often gravitates towards such names in an effort to give them another breath of life in hopes of making huge gains.
But just as quickly as these meme stocks can soar based on little or no news, they can also crash. Buyer awareness.
Read the original article at Business interested