ATIF Holdings: Major Short Squeeze Play?

ATIF Holdings (ATIF) is a company focused on business consulting, investment, and asset management. The holding company has its centers in Los Angeles, Hong Kong, China, and California. It mostly offers IPO Advisory Services to various mid-sized and small businesses in North America and Asia.

Sounds like a company with an intriguing business model, but doesn’t really sound like a meme stock.

However, ATIF stock has grown in interest among speculators of late, primarily as a potential short squeeze candidate. In many ways, investors could argue this stock has already squeezed.

Indeed, any stock that goes from around $0.50 to the $4 level in approximately one week is certainly worth considering as a potential short squeeze candidate. However, whether this stock can sustain these levels and continue drastically higher, as other short squeeze stocks have done, remains to be seen.

As a highly-shorted stock, investors betting on a short squeeze are hopeful that those shorting ATIF stock (selling borrowed shares) will have to buy back shares to cover their positions at these higher prices (or risk the stock going even higher, as their losses mount).

One of the key reasons why investors seem to believe ATIF can squeeze further is this company’s combination of both a high level of short interest and a high borrow fee rate. This has resulted in ATIF’s inclusion in a number of lists of top short squeeze candidate.

I remain neutral on this stock right now. (See ATIF Holdings stock charts on TipRanks)

ATIF Holdings: Short Squeeze Candidate

As mentioned, ATIF Holdings Limited is a leading provider of financial and advisory services. Apart from working with U.S.-based companies, it has also helped Chinese businesses to list publicly in the U.S. 

According to Fintel, ATIF comes with a higher-than-average short interest, along with a high borrow fee rate. That is to say, it would require more money for short-sellers to hold on to short positions of this particular stock. 

At the time of writing, ATIF stock has a 26.6% short interest, with a borrow fee of 57.8%. However, research suggests that the short interest in this stock might be decreasing. ATIF stock has moved up slowly from $3 to $4 per share throughout the last week of August and the first week of September. Currently, investors can pick up shares of ATIF stock at around the $3.50 level.

In some respects, investors might believe that ATIF stock has already squeezed. After all, this was a stock trading sub-$1 per share not that long ago.

That said, the company’s low float (fewer than 5 million shares) and other fundamentals make this an intriguing short squeeze candidate. For speculators, that’s a great thing.

5 for 1 Reverse Split

ATIF Holdings announced last month that the Board of Directors decided to opt for a reverse stock split of its issued, outstanding and authorized shares. The reverse split would take place at a ratio of 5 for 1, thereby combining 5 authorized shares into 1. The company noted that no shareholder vote was necessary to enact this reverse split.

The company had already filed for amendments to its Memorandum and Articles of Association in this regard on August 27. The shares have started trading on its split-adjusted basis on the NASDAQ. 

Typically, reverse splits are viewed negatively by the market. That’s because companies looking to combine their shares do so in order to maintain listing requirements. Such is the case with ATIF.

On July 26, 2021, ATIF Holdings got a notice from the Listing Qualification Department of Nasdaq. The notice told the company that it had fallen out of compliance with NASDAQ’s minimum bid price requirement of $1.00 per share. This reverse split has enabled ATIF Holdings to regain compliance as per NASDAQ’s Listing Rule.

After the Reverse Split, the company’s outstanding and issued ordinary shares have come down to 9,161,390 from 45,806,852. Shareholders who hold certificated shares will be assisted in the process of exchanging the stock certificates. However, those who hold shares in the book-entry form do not need to make any modifications. 

Bottom Line

ATIF Holdings tops Fintel’s list of stocks as a potential short squeeze this week. However, the stock seems to be hovering somewhat in recent days.

Will this stock see another short squeeze run, or will this momentum fizzle? That’s the question on the minds of many investors right now.

Indeed, this will be an intriguing stock to watch from here.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.

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