Allbirds erases over 50% as short open interest increases

Allbirds (Nasdaq:BIRD) erased over 50% of its recent peak price, sinking to $7.57. The company has set out to swap its apparel and shoes assets for $50M dedicated to building AI data centers. 

The former shoe company, now called NewBirdAI, is showing that a simple announcement of an AI pivot may not be enough to support the stock price. After the initial 750% rally, BIRD corrected to a lower range, losing around 50% from its local high. 

BIRD trading volumes also shrank from over $288M down to just $1.9M with an immediate outflow of traders. The price move also raised a question about the company’s new stage of price discovery as an AI company. 

Is Allbirds still exposed to another short squeeze?

The BIRD rally to a local high above $16 was not an organic expansion. The company traded with a minimal free float and no way to borrow shares. Thus, the outsized rally was triggered by the announcement of an AI pivot, but the trading itself hinged on squeezing the recently opened short positions. 

The company may be open to a similar short squeeze, though at a smaller scale. As of April 24, Nasdaq data showed that BIRD had open interest equal to 18.4% of its free float. 

Over the past few weeks, there has been a clear trend of rising short open interest. From the middle of March, the days to cover shrank from 11.73 to 4.17 days. The latest available BIRD stocks to cover short open interest are at 0.16 days. 

Prime brokerages offer around 35,000 shares for new shorting positions. The company is still niche and has not invited a mass attempt to cause a short squeeze.

BIRD has not gained meme stock appeal

BIRD has not been turned into a meme stock, but has been selected as a volatile asset. More short squeezes are expected, with potential significant price swings. 

The recent BIRD rally was compared to the sudden spike in Avis Budget Group, Inc. (Nasdaq:CAR). CAR rose to over $713, then crashed by around 70% to $217. The recent stock rallies were not comparable to meme stocks. Traders on the Wallstreetbets subreddit predict a series of short squeezes, long liquidations, and unexpected rallies. 

The newly active stocks reflect general interest in speculative assets, but the rallies remain considered too risky. BIRD or CAR has not been tokenized or traded on crypto-perpetual futures markets. 

The AI narrative still works for some stocks, with Bitcoin mining companies still in the green. Companies like IREN have a clear advantage in building data centers, mostly due to already established physical access to the grid. Most mining stocks that have pivoted to AI have strong year-to-date gains, reaching 80% for TerraWulf (Nasdaq:WULF).

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