Why Bsquare lit up screens

We should be used to it by now.

No name companies with a lack of news suddenly taking off.

And yet, no one saw this coming for Bsquare (BSQR), the tiny IoT software company.

TrackstarIQ searches soared alongside the share price that shot up from just below $2.50 to over $8.00 yesterday.

So, what sparked this fire, and is there more fuel left?

Bsquare’s business

In a nutshell, Bsquare provides customers with software and solutions that help them set up IoT, mainly manufacturers and connected device operators, much of which uses the cloud.

They divide their revenues into Partner Solutions, which leverage relationships with large software vendors such as Microsoft, and Edge to Cloud solutions which are more custom software development.

Right now, partner solutions account for 90% of their total revenues and carry a 17% gross margin while the Edge to Cloud runs a 13% margin.

What you may not realize is the company isn’t a spring chicken, founded all the way back in 1994.

In the last decade, the company saw revenues steadily drop from a high of $107 million in 2015 to $40 million in the last year.

Similarly, operating income was once positive at $6 million in 2015, but turned negative ever since.

So what caused the jump?

Same thing as many of these meme stocks – a small float and a squeeze.

With only around 12 million shares available for trading, and around 400,000 in daily trading volume, it doesn’t take much to move the stock.

When 240 million shares changed hands yesterday, it sent the price soaring.

While the number of shares sold short only accounted for around 6% of the float at the time, the stock opened up nearly 100% the next day.

That forced margin calls on anyone with short positions.

Is there any juice left?

As a trade, maybe.

As an investment, not a chance. 

The company doesn’t make money and shows no signs that it will.

But that doesn’t mean that Reddit and momentum traders can’t push price around for months.

Our hot take

Unless you like day trading, steer clear of this stock. 

And certainly, try not to hold a position overnight.

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