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Traders piled into shares of Rent the Runway on Thursday, sending the shares up by more than 220 percent after the apparel rental firm said it was betting on artificial intelligence tools to power its growth in the current year.

More than 34 million shares had changed hands, far surpassing the usual calm trading in a stock that coming into Thursday only had a market value of $26.27 million.

But numerous companies have kicked off rallies in their stocks over the last year by talking up their plans to use artificial intelligence to boost their businesses – and Rent the Runway is now the latest to join that frenzy.

The company has forecast revenue to grow between 1 percent and 6 percent in the current fiscal year, compared with a 0.6 percent rise in 2023, and expects breakeven free cash flow.

“Rent the Runway has just become the poster girl for investors that believe AI can help small business and not just large behemoths,” said Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors.

Shares of the company were last up 138.7 percent at $17.82, giving it a market capitalisation of about $63.3 million.

Last week, the company put into effect a one-for-20 reverse stock split to regain compliance with the minimum bid price requirement for continued listing on the Nasdaq.

Following the move, it now has a free float of about 2.6 million shares, according to LSEG data.

Strong buying pressure on a low float stock is causing sharp pressure, said Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners.

Rent the Runway, which focuses on selling designer brands, had seen a hit to demand due to quality issues and outdated product assortments. The company went public in 2021 and the stock was priced at $21.

CEO Jennifer Hyman said customer loyalty rate in the fourth quarter was up 10 percent year-over-year and the company has planned new designer launches for 2024.

By Ananya Mariam Rajesh; Editing by Ravi Prakash Kumar and Anil D’Silva

Learn more:

Rent the Runway Lays Off 10% of Corporate Staff

The restructuring will allow the company to direct more resources toward growth, CEO Jennifer Hyman said.



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