In a bit of an odd move, Ebang (NASDAQ:EBON) stock is up nearly 20% today after the Chinese blockchain technology company received a warning from the Nasdaq exchange that it will be delisted if it fails to maintain a minimum $1 trading price in coming months.
Normally, the threat of being delisted would be viewed negatively and a stock’s price would drop as a result. The rise in EBON stock might be a sign that investors are rallying to support it and push it above the $1 threshold that’s needed to maintain its listing compliance with Nasdaq. Or today’s increase could be an indication that retail investors are targeting the stock for a short squeeze. Ebang’s stock is currently trading at $0.43 and has fallen 60% this year.
In a media statement, Hangzhou, China-based Ebang announced that it has 180 calendar days, or until December 14 of this year, to get its share price above $1 and keep it there for a for a minimum of 10 consecutive business days to regain compliance with the Nasdaq exchange’s “minimum bid price requirement.”
Ebang added that it is “considering various measures” to raise its share price, including improving its financial position and results of operations. The company could also undertake a reverse stock split to lift its share price above the $1 that’s needed, though most companies view such as move as a last resort.
Why It Matters
Ebang is a comparatively small blockchain technology company whose shares are thinly traded at the bottom of the penny stock league tables. As such, it is unusual that the threat of being delisted would cause EBON stock to rally. Normally, the reverse would occur. The fact that Ebang is involved in the cryptocurrency sector and based in China adds to the uncertainty and volatility of the stock.
What exactly is going on and why EBON stock is up today is unclear. While it could be that investors are trying to support the share price and give it a boost, it might also be that the stock is being squeezed by investors who are betting against it. These short positions are bets that the price will go down. Naturally these positions will only increase with the Nasdaq’s threat of delisting.
What’s Next for EBON Stock
It may take a few days before it becomes clear exactly what is going on with EBON stock. But for now, investors should view today’s rally suspiciously and approach shares of Ebang with caution and skepticism.
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On the date of publication, Joel Baglole 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.
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