Why iRobot Stock Could Pull A 'Zombie Squeeze' — The Walking Debt

Core Viewpoint - iRobot Corp. has filed for Chapter 11 bankruptcy protection, indicating that current shareholders will be wiped out under the acquisition plan by Picea Robotics, leading to a significant decline in stock value [1]. Group 1: Bankruptcy and Stock Performance - iRobot's stock is crashing, with its equity value effectively reduced to zero [1]. - Retail traders with high risk tolerance may seek a "zombie squeeze," a phenomenon where a bankrupt stock experiences a temporary rally before ultimately failing [2]. Group 2: Market Mechanics - The potential for a stock rally despite bankruptcy arises from heavily leveraged short sellers closing their positions to avoid holding a worthless security, combined with retail traders looking for a "dead cat bounce" [3]. - This buying pressure can lead to a sharp price spike driven by liquidity mechanics rather than fundamentals [3]. Group 3: Speculative Catalysts - A rumor of a "White Knight" bidder could serve as a catalyst for a zombie squeeze, where unverified social media posts can lead to significant price increases in a short time [4]. Group 4: Financial Reality - iRobot carries over $200 million in debt, and creditors will be prioritized in bankruptcy proceedings, meaning shareholders are unlikely to see any returns unless all creditors are paid off first [5]. - Trading iRobot shares is characterized as high-risk speculation rather than genuine investment, akin to passing a stick of dynamite [5].