Reebonz Gives Up Huge Gains Following $20M Offering

Reebonz Holding Ltd RBZ is yet another extreme example of the powerful combination of low float and high trading volume.

Reebonz shares were trading down 46 percent on Thursday after gaining 220 percent Wednesday.

With no major news out from the e-commerce company, it’s likely market dynamics that are fueling the extreme volatility. The stock was halted multiple times Wednesday and Thursday on a circuit breaker.

What Happened

Reebonz is one of a number of low float stocks that have experienced major short-term rallies on little or no news in recent quarters. When shares start to rise, a flood of momentum traders coupled with a limited float can lead to parabolic spikes in share price.

The only bit of recent news from the company happened March 14 when the company announced it would be executing an 8-to-1 reverse stock split effective on March 15. The reverse split was approved via shareholder vote on Feb. 19. The reverse split will allow Reebonz to maintain its listing on the Nasdaq.

On Thursday, Reebonz traded lower after the company announced a $20,000,000 ordinary share offering.

See Also: An Empty Rally? Shipping Stocks Make A Low Float Comeback

Why It's Important

Reebonz’s reverse split will help the company maintain its Nasdaq listing after the stock’s share price dipped below the Nasdaq’s $1 minimum requirement earlier this month. Despite this week’s huge move, the stock remains down 81 percent overall in the past six months.

According to shortsqueeze.com, Reebonz only has 12,000 shares held short for a short percent of float of 0.6 percent. Those numbers suggest a short squeeze is likely not the culprit behind this week’s large move.

The stock’s 1.1 million-share float is minuscule, however, and a huge jump in trading volume this week explains the extreme volatility. On Wednesday, Benzinga Pro reported Reebonz’s trading volume was 49 times higher than its average daily trading volume. Stocks with floats that small can often be easily manipulated in the short-term, a red flag that the rally may not last long.

At time of publication, Reebonz was trading at $14.92 after trading between $6.50 and $9 in the seven days prior to Wednesday’s rally.

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