The regulatory winds may be changing.
Shares of New Fortress Energy (NFE +7.38%) jumped on Monday, finishing up 7.4%. The spike came as the S&P 500 and Nasdaq Composite lost 0.6% and 0.4%, respectively.
Puerto Rico’s Financial Oversight and Management Board (FOMB) conditionally approved a deal that could make or break the embattled liquified natural gas (LNG) company.
Today’s Change
(7.38%) $0.09
Current Price
$1.31
Key Data Points
Market Cap
$0B
Day’s Range
$1.27 – $1.50
52wk Range
$0.98 – $16.66
Volume
49M
Avg Vol
20M
Gross Margin
19.59%
Dividend Yield
N/A
New Fortress receives conditional approval
After months of intense scrutiny, a nearly $4 billion contract in Puerto Rico finally received the green light from regulators, provided several conditions are met, like finalizing a tolling agreement.
While it received a short-term reprieve from creditors, New Fortress is struggling to stay afloat as its debt continues to mount. Without the contract, the company would likely be forced into bankruptcy.
Image source: Getty Images.
The FOMB’s conditional stamp of approval was enough to send shares flying on hopes that the company could avoid such a fate.
Shareholders beware
New Fortress’s troubles have made it a heavily shorted stock, which has attracted retail investors betting on a short squeeze. That outcome isn’t impossible, but the risks here are severe. A company teetering on the edge of bankruptcy can leave common shareholders with nothing. In a restructuring, creditors stand first in line and often walk away with the lion’s share of what remains.
Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.