Investors looking at today’s price action in NanoString (NASDAQ:NSTG) stock ought to be shaking their heads in amazement. Indeed, after announcing the company would be filing for bankruptcy protection on Monday, many thought the story with NanoString was over. But not so fast. Now, shares of NSTG stock are up more than 180% in afternoon trading.
Of course, putting this move in context is important. Shares dropped from a close last week just shy of 50 cents per share down to around 5 cents yesterday. Thus, today’s tripling of the stock price still has NSTG stock pegged around 15 cents. That’s a stark drop from where it was trading last week.
With so many investors flushed out of this stock, it’s clear that speculators are at work with this micro-cap name. Let’s dive into what’s driving the action in NanoString today.
Why Is NSTG Stock Surging Today?
In order to grasp how such moves can happen, let’s first take a look at the trading volume with this little-known genomics company. Today, more than 360 million shares have traded hands so far (and there’s plenty of time left in the session). On an average day, the stock’s trading volume is closer to 3.7 million shares.
That’s nearly 100 times the average daily volume we’re seeing today alone. The company’s very low price per share (I mean, you can buy a lot of shares for 5 cents apiece) undoubtedly has something to do with this volume increase. However, considering that the stock was trading 10 times cheaper on a relative basis yesterday compared to last week, this 100-times surge in volume can’t be accounted for by stock price movements alone.
Indeed, speculators appear to be out in full force with certain low-volume stocks once again. Today’s move in NSTG stock is reminiscent of many of the short squeezes we saw litter the market two years ago. Investors who are seemingly looking past the company’s dismal outlook — (bankruptcy isn’t a catalyst that generally invites investors to buy the dip) — are buying this stock in heavy quantity today, looking to bid up its price and push short sellers out of their positions.
There’s also another dynamic that could be building here. Specifically, those who have shorted this stock may have looked to exit their short ahead of a full-on bankruptcy proceeding. At 5 cents per share, nearly all of the juice has been squeezed out of this lemon. Accordingly, in order to close out these positions, investors could have been forced to buy back shares at the market price, potentially driving some of today’s move.
In any case, NSTG stock looks to be, for all intents and purposes, a zero. Investors looking to pick up some pennies here may be doing so in front of a steamroller. Some serious caution is warranted when looking at this stock from any angle.
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On the date of publication, Chris MacDonald 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.
