Last Friday, Bird Global (NYSE:BRDS) announced that the New York Stock Exchange gave it a delisting warning over non-compliance issues. Despite the negative implications, though, BRDS stock shot up 18% early this morning before shedding some optimism. Heading into the afternoon, shares are up by about 4%.
At first, the enthusiasm for BRDS stock may seem odd. Per exchange standards, the NYSE requires listed securities to maintain a price per share of at least $1. Failure to uphold this standard over a consecutive 30-day period results in a delisting warning, which is exactly what just happened to Bird Global.
So, why did shares go up? At least part of the upside appears to be related to Bird’s incentive to remain on the exchange.
Why Is BRDS Stock Rising Higher?
Bird plans to notify the NYSE by July 5 about its intentions to cure the stock price deficiency. Because the exchange provides maximum investor visibility, the company has every incentive to remain listed. That means you can expect Bird to throw the kitchen sink at the issue. Essentially, BRDS stock is up because astute traders recognize that management is desperate — and that desperation could lead to actions that will drive up shares.
Another factor to consider here is that some investors may be anticipating a short squeeze. Look at what recently happened with Ebang (NASDAQ:EBON), for example. After a delisting warning from the Nasdaq, EBON stock rocketed on the anticipation of bullish traders seeking to strike fear in potentially overleveraged bears.
Chasing this thesis will be tricky for BRDS stock, however. Investors should note that, as of the end of May, its short percentage of float is 6.35%. The short ratio is 2.4 days to cover. Neither metric is extreme enough to warrant a comfortable contrarian trade.
What’s Next for Bird?
Looking forward, Bird’s micromobility angle could be lucrative. However, the company has historically printed deep net annual losses. Additionally, delisting is really meant to protect retail investors from poor businesses. While Bird’s first-quarter performance does offer some encouragement, management has a tough market to crack with significant obstacles ahead.
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On the date of publication, Josh Enomoto did not hold (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.