For investors looking for volatility, look no further than Lordstown Motors (NASDAQ:RIDE). Indeed, RIDE stock is one that has gained significant momentum this past month. Trading around $7 per share in mid-May, RIDE stock appreciated to nearly $16 yesterday on some pretty bullish momentum.
However, yesterday afternoon saw shares implode after a Lordstown Motors issued a going concern warning in its quarterly financial filings yesterday. The company’s said the following: “These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of at least one year from the date of issuance of these unaudited condensed consolidated financial statements.”
That’s certainly not good news for investors.
This single statement caused the stock to plummet to below $9 per share. This downside move of nearly 40% in less than 24 hours is significant. Indeed, a going concern warning is about as bearish a piece of news as investors can receive on any stock. Accordingly, this selloff appears to represent the market factoring in bankruptcy risk to a degree that simply wasn’t factored in previously.
However, today, shares of Lordstown closed in the green. It seems investors are brushing off the liquidity concerns. Let’s discuss why this is the case.
RIDE Stock Rebounding on Financing Discussions
Today, Lordstown announced the company is in talks with multiple parties to secure the necessary funding to meet its obligations.
This announcement more than completely reversed earlier losses from the day which saw RIDE stock down more than 20% from yesterday’s close.
Investors appear to be somewhat placated by this announcement. The company’s statement confirmed it has “adequate capital to continue operations, meet supplier obligations and begin limited production,” but will need to seek additional funds for strategic long-term investments. The company reiterated its debt-free balance sheet and significant tangible assets as positives. Indeed, leveraging these assets to seek asset-backed financing, or some mix of debt and equity financing over the medium term, has stoked positive sentiment once again in this stock.
Any sort of equity issuance at this point could cool the meme rally RIDE stock has seen of late. Accordingly, it’s clear a number of retail investors have simply sought gains elsewhere.
Whether this meme stock rally can continue with RIDE remains to be seen. However, one thing is for certain. This stock is likely to remain very volatile in the near term.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
