Shares of Loyalty Ventures Inc. (NASDAQ:LYLT) last traded at $0.2709, a gain of over +0.1009$ (+59.35%). More than 194,654,676 shares exchanged hands compared to an average daily volume of mere 5.25M shares.
Is today’s surge more than a dead cat bounce ?
On March 10, 2023, Loyalty Ventures Inc. and some subsidiaries filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court, while LoyaltyOne, a subsidiary, sought protection under Canada’s CCAA in the Canadian Court. LoyaltyOne has filed motions for a sale and investment solicitation process (SISP), which, if approved, will invite interested parties to participate in a sale process. Bank of Montreal (BMO) has entered into a purchase agreement to acquire LoyaltyOne’s AIR MILES Reward Program business, subject to the SISP and other customary closing conditions. The acquisition aims to secure the program and enhance AIR MILES’ position in the market.
In connection with the bankruptcy filings, the Company has filed motions to continue its operations as usual. LoyaltyOne will enter into a debtor-in-possession (DIP) facility with BMO for a $70 million secured credit facility, subject to Canadian Court approval. Additionally, the Company and LoyaltyOne will enter into an intercompany DIP facility, subject to the approval of the Bankruptcy Court and the Canadian Court. This facility is expected to provide enough liquidity for the Company to meet its financial obligations during the chapter 11 cases.
Loyalty Ventures Inc. has announced its intention to voluntarily delist its common stock from the Nasdaq Global Select Market and deregister it from Section 12(b) of the Securities Exchange Act of 1934. This summary is provided in compliance with Rule 12d2-2(c)(2)(iii) under the Exchange Act and Nasdaq Listing Rule 5840(j)(1)(iii).
It would be interesting to find out the current short position in LYLT. If many investors are shorting the same stock, a sudden increase in buying demand may cause the stock price to rise rapidly, forcing short sellers to cover their positions to prevent further losses. This phenomenon, known as a short squeeze, can lead to significant losses for short sellers and cause the stock price to surge.