Online education platform provider Meta Data (NYSE:AIU) is surging today after the company completed its reverse stock split. This 1-for-5 reverse stock split brought the company’s share price back in compliance with listing standards and is clearly something investors are cheering. At the time of this writing, AIU stock is up more than 100% as investors look for smaller-cap stocks to bet on as key beneficiaries of the larger rotation we have going on.
Additionally, investor interest in the online education space appears to be peaking, with rival 2U (NASDAQ:TWOU) seeing a similar surge today despite recently announcing that it would be filing for bankruptcy. Given the high amount of short interest in this sector, it’s possible some investors may be betting on short squeeze rally potential. That’s despite some strong headwinds and clear concern building around these stocks being potential zeros.
Let’s dive into what to make of these incredible moves in these little-known education technology stocks.
AIU Stock Surges on Reverse Split
A reverse stock split can have varying impacts on a given company. On the one hand, these splits pave the way for companies like Meta Data to stay publicly listed. Having access to the equity market can be important for companies looking to raise growth capital. Accordingly, there’s some reason for investors to be excited about such a move.
On the other hand, however, being forced to reduce the number of outstanding shares to retain a listing can be viewed negatively. In essence, most companies that are in such a position and require a reverse split tend to be on the ropes. However, after today’s move, Meta Data is now a company with a $900 million market capitalization. So, maybe someone knows something we all don’t.
That’s possible — and it’s always possible for short squeezes to take place from time to time in beaten-down sectors as well. We’ll have to see whether today’s move in AIU stock can be sustained. But for now, I’d be skeptical about the ability of Meta Data, 2U or any similar company to retain this sort of momentum for an extended period of time.
On the date of publication, Chris MacDonald 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
