Struggling on life support, search engine marketing specialist Locafy (NASDAQ:LCFY) is facing delisting from the Nasdaq Exchange due to non-compliance with its minimum shareholders’ equity requirement of at least $2.5 million. However, management confirmed that it requested a determination hearing, possibly buying the company time. However, despite some possible speculative interest, LCFY stock dropped over 6% in early afternoon trading.
According to the accompanying press release, in addition to non-compliance with the shareholder equity requirement, Locafy reportedly: “…did not meet the alternative compliance standards relating to the market value of listed securities of $35 million or net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years.”
At the moment, the market capitalization of LCFY stock is a bit under $8 million. Further, based on data from Google Finance, the average trading volume comes out to only 3,140 shares. And, considering the home bias effect, being based in Australia probably doesn’t help matters.
Nevertheless, on May 5, May 18 and June 12 of this year, Locafy “…submitted a plan and supporting documentation to regain compliance with the minimum stockholders’ equity requirement.” Nasdaq responded that the documentation lacked credibility, setting a June 28 deadline to request a hearing. Otherwise, LCFY stock will be delisted on June 30.
LCFY Stock Buying Time and Possibly Believers
Fundamentally, then, enthusiasm spiked for LCFY stock as management confirmed it plans to timely request a hearing. On paper, this action should buy time as the Nasdaq considers the evidence brought forward. At the same time, Locafy may also be attracting market speculators.
Technically speaking, LCFY stock presents a viable ground for extreme gamblers. As a general rule, low-volume securities tend to be more volatile than their “normal” volume counterparts. Primarily, this volatility stems as a function of wider bid-ask spreads. Naturally, one of the consequences of low-volume assets is that their stakeholders may have difficulty selling their shares at a desirable rate due to a lack of interest.
On the flip side, news (no matter how mundane) that manages to boost eyeball count can be possibly lucrative for contrarians. In addition, because of the low volume of entities like LCFY stock, it doesn’t take much “energy” to spark mobility.
Unlike the memes that dominated headlines throughout the post-pandemic trading cycle, LCFY stock doesn’t appear a beneficiary of short-squeeze speculation. According to data from Fintel, LCFY’s short interest is only 0.43% of its float. Its short interest ratio sits at a mere 0.77 days to cover. These stats are unremarkable.
However, LCFY stock appears to have hit a bottom in late November last year. Since then, it printed a series of rising lows, perhaps drawing intrigue for daredevil traders.
Why It Matters
Although LCFY stock may pique curiosity, prospective traders should assess the matter soberly. Since making its public market debut in March last year, shares have cratered by nearly 89%. It’s possible that this time, it’s different. However, those are dangerous words to live by.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto 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.
