American Virtual Cloud Technologies (AVCT) is not a well-known company and stock to many, at a market cap of less than $200 million. However, this has been one of the most hotly debated small cap names on the discussion boards in December, as the table below illustrates.
Today, Wall Street Memes looks at this under-the-radar tech meme stock and looks for clues as to what may happen to AVCT next.
Source: Ape Wisdom
A brief intro to AVCT
American Virtual Cloud is an Atlanta, Georgia-based IT solutions provider that employs just about 300 people. The company has produced only around $110 million in revenues in the past 12 months, which values the company at a modest multiple of about 1.5 times trailing sales.
There is nothing particularly unique about American Virtual Cloud’s business. However, since the company is small, developments like those recently witnessed can have a significant impact on value perception: takeover rumors, partnership expansions, and a $25 million capital raise are a few of them.
Business fundamentals aside, traders have honed in on a potential short squeeze that could be driven by (1) elevated short interest, (2) naked shorting, (3) high levels of dark pool activity and (4) high costs to borrow.
Finding good, reliable data on the items above can be tough. Yahoo Finance, for example, lists the short interest ratio at less than 1% of the float as of the end of last month. Fintel, on the other hand, reports 14% ratio and stratospheric short borrow fee rate of over 200%.
Ask Redditors, however, and some seem to believe that the short squeeze opportunity is more substantial than any of the numbers above may suggest. As a result, trading activity on AVCT stock has skyrocketed this month, as the chart below depicts.
On December 27, for instance, trading volume for a single session was about twice as large as AVCT’s total market cap.
Could AVCT be next to reach the moon?
AVCT stock has climbed a respectable 47% in December alone, from $1.61 at the end of November. But make no mistake: the impressive gains have come alongside dizzying volatility and a sharp correction of nearly 60% between the December 10 intraday high and only two trading days later.
The stock price could head substantially higher from here, considering the small market cap, modest float of around 28 million shares and sudden increase in popularity among retail traders. But this is likely to be a very bumpy ride suited only for high-octane traders — one that is not guaranteed to end well for everyone.