Allbirds, the sneaker brand once valued at over $4 billion at its peak, recently announced a rebrand to NewBird AI, shifting its focus to AI processing infrastructure.
This rebranding occurred one day before Allbirds was set to shut down, and following the announcement of becoming an AI company, its stock soared 582%. Bloomberg data shows it peaked at a gain of 876% on 15 April before settling down.
Allbirds is an American-New Zealand eco-friendly sneaker and apparel brand popular among Silicon Valley tech workers for its natural materials. Starting as a New Zealand startup, it went public on the Nasdaq in 2021, reaching a $4 billion valuation.
The IPO happened when near-zero interest rates boosted speculative stocks, but its share price declined steadily afterward. This forced Allbirds to sell all assets, including intellectual property, to American Exchange Group for about $39 million. By last Tuesday, the company's market value had dropped to roughly $22 million.
Allbirds' pivot targets the AI trend despite no clear link between footwear and advanced computing. Its stock surged dramatically, leveraging its previous reputation as a popular eco-conscious Silicon Valley brand, as it prepared to reposition itself as an AI infrastructure company.
This episode highlights how the market fervor drives investors to pour huge sums into potential AI winners while dumping shares of firms perceived as vulnerable in this arena.
The recent stock surge partially restored value, with the company's market cap rising to nearly $150 million after Wednesday's market close.
"A shoe company rebranding itself as an AI infrastructure business is a story that effectively captures retail investors' attention," said Dave Mazza, CEO of Roundhill Investments, a firm specializing in meme stocks and an early buyer of Allbirds shares.
"The market's rising sentiment led to higher trading volumes and increased volatility in BIRD stock after its AI transition, which our ETF is designed to capture in real time," Mazza added.
Allbirds revealed plans to raise up to $50 million via convertible debt to invest in computing equipment, alongside rebranding as "NewBird AI," aiming to become a full-fledged provider of GPU-as-a-Service (GPUaaS) and AI-driven cloud solutions.
Because IPOs can be challenging, some companies that fail in public markets use their existing listing status as a shortcut to bring new concepts or businesses to market.
Jay Ritter, finance professor at the University of Florida, said, "Being a publicly listed company is an asset. In the past, we've seen reverse mergers where private firms merge with existing public companies. This approach often carries a negative reputation since such companies tend to be of lower quality and typically offer poor returns to investors."
However, Allbirds is not the first to try revitalizing itself by riding a hot technology trend. Similar phenomena occurred during the dot-com bubble, such as Long Island Iced Tea Corp. changing its name to Long Blockchain Corp. at the start of the crypto craze.
Matt Maley, chief investment strategist at Miller Tabak + Co., commented, "Developments like this signal that the market is forming a bubble. While not surprising amid stock market rallies, investors should exercise caution."
Many investors overlook risks and try to ride rising stocks without fundamental support, hoping others will buy later. This dynamic drives recurring waves of meme stocks since the COVID period.
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