Among the more volatile stocks in the market of late is online wine club Winc (NYSEAMERICAN:WBEV). Today’s surge of more than 100% in WBEV stock follows previous plunges we reported on, as the company announced plans to enter Chapter 11 bankruptcy.
Any company that announces a bankruptcy filing is in serious trouble. This certainly seems to be the case with Winc, which has reported continued losses since going public roughly one year ago. Accordingly, given the market’s focus on profitable companies, the decline in WBEV stock this year may be understandable.
Since raising $22 million in an initial public offering (IPO) in November 2o21, shares of WBEV stock have sunk from around $13 to as low as 19 cents last week. That’s good for a 98% decline from peak to trough, putting this company squarely in penny stock territory.
That said, there are some factors investors seem to like with this speculative name. Let’s dive into what may be behind this surge in Winc today.
Why Is WBEV Stock Surging Today?
Interestingly, Winc reported in its Chapter 11 filing it has more assets than liabilities on its balance sheet. This suggests to some investors the company may make it out of this bankruptcy in a better position than many others.
Of course, we’ve also seen impressive rallies in other bankrupt stocks take hold recently. Whether we’re talking about Hertz (NASDAQ:HTZ), Revlon (OTCMKTS:REVRQ) or others, there are plenty of examples of speculative momentum-driven rallies in the penny stock world.
Some of that is a result of the difficulty investors have with valuing such firms in bankruptcy proceedings. Some companies don’t make it out of the bankruptcy process, and ultimately dissipate. Others emerge stronger than ever. Thus, at some price, even the most beaten-down names may be oversold.
That said, this rally in WBEV stock appears to be more speculative in nature than based on any fundamentals. Investors looking to build a position in this name ought to be careful. Volatility works in both directions, though today, volatility is the friend of many investors in this name.
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.
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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