Yet another meme stock is about to collapse. IronNet (OTCMKTS:IRNT) enjoyed a monumental surge of over 200% in September 2021. Since then, however, IRNT has spent the past two years gradually trending downward. Shares have gone from over $30 per share to their current price of just 31 cents.
Given how far the stock has fallen, it’s no surprise that the company is about to go under. Yesterday, the cybersecurity firm announced plans to furlough most of its staff and “substantially curtail” operations. It also discussed the possibility of seeking “bankruptcy reorganization or liquidation.” While this could have alerted the r/WallStreetBets crowd to try and push for a short squeeze, it seems that even retail investors don’t want to go near shares now.
What’s Happening With IRNT Stock?
To say that the past five days have been chaotic for IronNet would be an understatement. IRNT stock is down more than 65% for the past week and there’s no reason to suspect things will get better. Given recent developments, shares are likely to keep declining, although they don’t have much further to fall. IRNT is also down more than 90% for the past six months.
In a recent 8-K filing with the U.S. Securities and Exchange Commission (SEC), IronNet laid out the problems it’s facing:
“In the absence of additional sources of liquidity, the Company’s existing cash and cash equivalents and anticipated cash flows from operations are not sufficient to meet the Company’s operating and liquidity needs.”
That alone sounds like reason enough to walk away from IRNT stock. When we factor in the furloughing of workers and possibility of bankruptcy-related reorganization, this looks like a company fighting an uphill battle it can’t win.
This also isn’t the first time IronNet has encountered issues. Last year, investors accused chairman and co-CEO Keith Alexander of artificially inflating share prices as part of a pump-and-dump scheme. But even before that, the company’s financials were concerning at best. After its 2021 surge, InvestorPlace contributor Alex Sirois described IronNet as a “mediocre firm in a strong sector,” flagging its weak fundamentals.
That highlights yet another reason why investors are likely to walk away from IRNT. The cybersecurity sector is full of high-performing firms that have displayed impressive growth this year while shares of IronNet have sunk. Even fellow micro-cap plays like LogicMark (NASDAQ:LGMK) seem to have more to offer investors.
Why It Matters
What’s happening with IronNet is similar to the unravelling that’s playing out with Meta Materials (NASDAQ:MMAT) and Mullen Automotive (NASDAQ:MULN). IRNT stock is just the next penny stock in line to suffer from its lack of real growth and dependance on meme momentum. Even if a reorganization could help it remain in business, the company is facing rising competition from much more stable firms.
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On the date of publication, Samuel O’Brient 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.