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.
NASDAQ: NFE
Key Data Points
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.
