2U (NASDAQ:TWOU) stock closed up a staggering 112% to start the week, just days after announcing it had filed for Chapter 11 bankruptcy protections.
Last week, 2U announced a deal with lenders to cut its debt by 50%, while extending the duration of its loan. It will also receive an additional $110 million in capital from lenders.
It’s unclear what’s lifting the Maryland-based firm, which owed more than $1 billion at the end of its fiscal first quarter. The company expects to finish the bankruptcy process by the end of September. Until then, Chief Executive Paul Lalljie expects the company will continuing operating as usual.
“The steps we are taking today will enable us to continue investing in our offerings, services, and world-class team to deliver unparalleled online learning to meet the needs of students today,” Lalljie stated at the time of the Ch. 11 filing.
When news broke last week that 2U declared bankruptcy, TWOU shares plummeted more than 60% in the following trading session. As such, today’s jump could be viewed as investors buying back shares after a significant drop.
That said, it’s tough not to view today’s jump as the result of some sort of coordinated short squeeze effort following its plunge.
Is TWOU Stock Being Short Squeezed?
A short squeeze is a targeted effort among investors to buy up large quantities of a stock that is perceived bearishly. By doing so, they “squeeze” short sellers, who face potentially infinite losses by holding onto their positions. As those short sellers are forced to buy shares to cover their positions, the security’s share price balloons even further.
Fintel currently shows that 0.34% of 2U’s float is being sold short. However, there is the possibility that this figure has increased in the days since its bankruptcy filing. It is also worth noting that 2U has just about 2.7 million shares in its float, making it more susceptible to volatile trading.
As such, it’s impossible to confirm exactly what pushed TWOU stock up so much today. Regardless, 2U loyalists are likely quite pleased.
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On the date of publication, Shrey Dua 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
