There may be a spike, but it won't be from shorts covering. If the shares are cancelled, a long position has zero value. Also, there is nothing for a short seller to buy back. You don't have to cover if shares get cancelled. The danger for a short is that the company might emerge from bankruptcy without cancelling the common shares. Rare, but it does happen. When that occurs, shorts get roasted
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.