Take advantage of technology (NASDAQ:ENJY) has filed for bankruptcy, but ENJY stock soared around 80% yesterday and jumped 68% in morning trading today. Shares started trading publicly last October after the company merged with a SPAC. Shares of Enjoy were initially worth $1.1 billion.
Launched by Apples (NASDAQ:AAPL) former retail executive Ron Johnson in 2014, Enjoy explained that he decided to seek bankruptcy protection because he was struggling to raise funds in the current macroeconomic environment.
Enjoy focuses on providing popular consumer electronics to consumers and then tries to sell them other offers. The company made an agreement “to sell most of its assets to appliance insurance company Asurion LLC, which has agreed to provide a $55 million loan to fund the company in the event of bankruptcy,” The Wall Street Journal reported.
What will happen to ENJY shares?
In a June 16 article on Revlon (NYSE:ROUND), the well-known cosmetics company that filed for bankruptcy in June, I explained that:
When companies file for Chapter 11 bankruptcy, their stock typically loses almost all of its value. This is because the rights of bondholders and other lenders have a higher priority under bankruptcy law than the rights of shareholders.
Ultimately, the share price of bankrupt companies may bounce slightly from their lows. Or their stocks may be completely wiped out, becoming worthless.
Therefore, at some point, ENJY stock is likely to become almost or completely worthless.
Enjoy is Johnson’s second resounding failure
Johnson became CEO of the retailer JC Penney in 2011 and his strategies were generally very poorly received by the chain’s customers. As a result, he only spent 17 months in this leadership role.
On Penny Stocks and Low-Volume Stocks: With rare exceptions, InvestorPlace does not publish commentary on companies with a market capitalization of less than $100 million or trading fewer than 100,000 shares per day. This is because these “penny stocks” are often the playground of scammers and market manipulators. If we ever post comments on a low-volume title that may be affected by our comments, we require thatInvestorPlace.comThe authors of disclose this fact and warn readers of the risks.
Read more: Penny Stocks — How to make profit without getting scammed
As of the date of publication, Larry Ramer had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.